Assume that the expectation of declining housing prices cause households to reduce their demand for new houses and the financing that accompanies it. If the nation has highly mobile international capital markets and a flexible exchange rate system, what happens to the quantity of real loanable funds per time period and GDP Price Index in the context of the Three-Sector-Model?
a. The quantity of real loanable funds per time period rises, and GDP Price Index falls.
b. The quantity of real loanable funds per time period falls, and GDP Price Index remains the same.
c. There is not enough information to determine what happens to these two macroeconomic variables.
d. The quantity of real loanable funds per time period falls, and GDP Price Index rises.
e. The quantity of real loanable funds per time period falls, and GDP Price Index falls.
Question 2 - The virtual currency battle between Facebook and Zynga reminds us that:
a. Once a company starts a virtual currency, it is difficult and costly to abolish the currency. For nations, the same is true. Countries, like Greece, that entered the European Monetary Union now find it very difficult and costly to abandon the euro.
b. Companies that start virtual currencies can abolish them rather quickly, which stands in stark contrast to countries, like Greece, that entered the European Monetary Union but now find it difficult and costly to abandon the euro.
c. Companies that start virtual currencies are like countries, such as Greece, that entered the European Monetary Union. In both cases, it appears relatively easy to abandon the virtual currency and currency area.
d. Countries, like Greece, that entered the European Monetary Union now find it relatively easy and inexpensive to abandon the euro. This stands in stark contrast to companies that start virtual currencies and wish to abolish them.
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