If the money supply rises by 8 and the average price level rises by 8, then the supply and demand for real loanable funds change as follows:
a. Actually, neither real supply nor real demand changes.
b. Real supply rises by 8 and real demand remains the same.
c. Real demand rises by 8 and real supply remains the same.
d. Real demand and supply rise by 8.
e. Real supply rises, falls, or stays the same depending on the relationship between actual and expected inflation.
Question 2 - Assume that the central bank lowers the discount to increase the nation's monetary base. If the nation has highly mobile international capital markets and a fixed exchange rate system, what happens to the current international transactions balance and monetary base in the context of the Three-Sector-Model? State your answer after the macroeconomic system returns to complete equilibrium.
a. The current international transactions balance rises and monetary base rises.
b. The current international transactions balance rises and monetary base falls.
c. The current international transactions balance and monetary base fall.
d. The current international transactions balance and monetary base remain the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
Question 3 - Which of the following has had the most rapid growth over the last two decades?
a. Germany
b. France
c. Pakistan
d. Bangladesh
e. India
Question 4 - Which of the following does not increase (i.e., shift) the supply curve of real loanable funds?
a. Open market purchases of government securities by the central bank.
b. A decrease in the discount rate.
c. A decrease in the reserve ratio by the central bank.
d. A decrease in the preferred asset ratio for near money (N/D), due to a shift in household preferences.
e. All of the above increase the supply.
Question 5 - Assume that the central bank sells government securities in the open market. If the nation has highly mobile international capital markets and a fixed exchange rate system, what happens to the real risk-free interest rate and current international transactions in the context of the Three-Sector-Model? State your answer after the macroeconomic system returns to complete equilibrium.
a. The real risk-free interest rate falls and the current international transactions balance becomes more negative (or less positive).
b. The real risk-free interest rate rises and the current international transactions balance becomes more negative (or less positive).
c. The real risk-free interest rate and the current international transactions balance remain the same.
d. The real risk-free interest rate rises and the current international transactions balance remains the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
Quick Reply
