Assume that the central bank purchases government securities in the open market. 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 the nominal value of the domestic currency in the context of the Three-Sector-Model?
a. There is not enough information to determine what happens to these two macroeconomic variables.
b. The GDP Price Index rises, and nominal value of the domestic currency rises.
c. The GDP Price Index falls, and nominal value of the domestic currency rises.
d. The GDP Price Index rises, and nominal value of the domestic currency remains the same.
e. The GDP Price Index rises, and nominal value of the domestic currency falls.
Question 2 - Which of the following is inaccurate:
a. The monetary base rises only if the central bank's assets rise.
b. The monetary base rises if the central bank lowers the reserve ratio.
c. An increase in government spending does not affect the monetary base.
d. Foreign exchange transactions between domestic and foreign banks do not affect a nation's monetary base.
Question 3 - Assume that the central bank purchases government securities in the open market. If the nation has highly mobile international capital markets and a flexible exchange rate system, what happens to the GDP Price Index and net nonreserve-related international borrowing/lending in the context of the Three-Sector-Model?
a. The GDP Price Index falls, and net nonreserve-related international borrowing/lending becomes more negative (or less positive).
b. The GDP Price Index and net nonreserve-related international borrowing/lending remain the same.
c. The GDP Price Index falls, and net nonreserve-related international borrowing/lending becomes more positive (or less negative).
d. The GDP Price Index rises, and net nonreserve-related international borrowing/lending becomes more negative (or less positive).
e. The GDP Price Index rises, and net nonreserve-related international borrowing/lending becomes more positive (or less negative).
Question 4 - A reduction in the required reserve ratio has the instant effect of:
a. Increasing the monetary base.
b. Increasing total bank reserves
c. Increasing excess reserves.
d. Increasing bank shareholders' equity.
e. Decreasing bank shareholders' equity.
Question 5 - Assume that the central bank purchases government securities in the open market. If the nation has highly mobile international capital markets and a flexible exchange rate system, what happens to the GDP Price Index and reserve-related (central bank) transactions in the context of the Three-Sector-Model?
a. The GDP Price Index falls, and reserve-related (central bank) transactions become more negative (or less positive).
b. The GDP Price Index and reserve-related (central bank) transactions remain the same.
c. The GDP Price Index falls, and reserve-related (central bank) transactions remain the same.
d. The GDP Price Index rises, and reserve-related (central bank) transactions become more positive (or less negative).
e. The GDP Price Index rises, and reserve-related (central bank) transactions remain the same.
Question 6 - A reduction in the required reserve ratio has the instant effect of:
a. Increasing bank shareholders' equity.
b. Increasing total bank reserves
c. Increasing excess reserves.
d. None of the above is correct.
e. Increasing the monetary base.
Question 7 - Assume that the central bank purchases government securities in the open market. If the nation has highly mobile international capital markets and a flexible exchange rate system, what happens to the GDP Price Index and current international transactions in the context of the Three-Sector-Model?
a. The GDP Price Index falls, and current international transactions become more negative (or less positive).
b. The GDP Price Index and current international transactions remain the same.
c. The GDP Price Index rises, and current international transactions remain the same.
d. There is not enough information to determine what happens to these two macroeconomic variables.
e. The GDP Price Index rises, and current international transactions become more positive (or less negative).
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