Assume that the central bank purchases government securities in the open market. If the nation has ...

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 GDP Price Index in the context of the Three-Sector-Model?
a. The quantity of real loanable funds per time period and GDP Price Index remain the same.
b. The quantity of real loanable funds per time period rises, and GDP Price Index falls.
c. The quantity of real loanable funds per time period rises, and GDP Price Index rises.
d. The quantity of real loanable funds per time period falls, and GDP Price Index falls.
e. There is not enough information to determine what happens to these two macroeconomic variables.

Question 2 - One of the major purposes of reserve requirements is to provide:
a. Sources of foreign exchange.
b. Sources of foreign investment funds.
c. Cash flow for business firms.
d. Monetary authorities with a means of regulating the lending ability of banks.
e. Banks with the means to make loans.

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Assume that the central bank purchases government securities in the open market. If the nation has ...

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