Assume that foreign capital flows from a nation increase due to political uncertainly and increased risk. 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 the nominal value of the domestic currency in the context of the Three-Sector-Model?
a. The real risk-free interest rate rises and nominal value of the domestic currency falls.
b. The real risk-free interest rate falls and nominal value of the domestic currency remains the same.
c. The real risk-free interest rate rises and nominal value of the domestic currency remains the same.
d. The real risk-free interest rate rises and nominal value of the domestic currency rises.
e. There is not enough information to determine what happens to these two macroeconomic variables.
Question 2 - Marx's notion that societies go through inevitable stages of evolution is called:
a. Surplus value
b. Dialectical materialism
c. The socialist revolution
d. Primitive capitalist accumulation
e. All of the above
Question 3 - Which of the following is not a potential source of demand for real loanable funds in the U.S. real loanable funds market?
a. U.S. individuals.
b. U.S. businesses
c. U.S. governments (state, local, and national).
d. Foreign governments, businesses, and individuals.
e. All the above are potential sources of demand.
Question 4 - Assume that foreign capital flows from a nation increase due to political uncertainly and increased risk. 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 real GDP in the context of the Three-Sector-Model?
a. The real risk-free interest rate rises and real GDP falls.
b. The real risk-free interest rate falls and real GDP rises.
c. The real risk-free interest rate rises and real GDP remains the same.
d. The real risk-free interest rate and real GDP remain the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
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