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 quantity of real loanable funds per time period and net nonreserve international borrowing/lending balance in the context of the Three-Sector-Model?
a. The quantity of real loanable funds per time period falls and net nonreserve international borrowing/lending balance becomes more negative (or less positive).
b. The quantity of real loanable funds per time period rises and net nonreserve international borrowing/lending balance becomes more negative (or less positive).
c. The quantity of real loanable funds per time period falls and net nonreserve international borrowing/lending balance becomes more positive (or less negative).
d. The quantity of real loanable funds per time period and net nonreserve international borrowing/lending balance remain the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
Question 2 - Pillar(s) of the planned socialist economy:
a. State ownership
b. Planned resource allocation
c. Leading role of the party
d. All of the above
e. None of the above
Quick Reply
