The Washington Consensus argued that transition should begin with
a. The creation of macroeconomic stability
b. A free floating exchange rate
c. De-privatization
d. All of the above
e. None of the above
Question 2 - 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. An increase in the reserve ratio by the central bank.
d. A reduction in the preferred asset ratio for currency in circulation (C/D), due to a shift in household preferences.
e. All of the above increase the supply.
Question 3 - 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 net nonreserve-related borrowing/lending 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 remains the same and net nonreserve-related borrowing/lending balance becomes more positive (or less negative).
b. The real risk-free interest rate falls and net nonreserve-related borrowing/lending balance becomes more negative (or less positive).
c. The real risk-free interest rate rises and net nonreserve-related borrowing/lending balance becomes more negative (or less positive).
d. The real risk-free interest rate and net nonreserve-related borrowing/lending balance remain the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
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