Assume that the government increases spending and finances the expenditures by borrowing in the domestic capital markets. If the nation has low mobility international capital markets and a flexible exchange rate system, what happens to the real GDP and current international transactions in the context of the Three-Sector-Model?
a. Real GDP falls, and current international transactions become more negative (or less positive).
b. Real GDP rises, and current international transactions become more negative (or less positive).
c. Real GDP and current international transactions remain the same.
d. Real GDP rises, and current international transactions remains the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
Question 2 - Banks deposit funds at the central bank, because:
a. They need them there in order be able to purchase government securities.
b. They can be counted as required reserves.
c. Both of the above are true.
d. Actually, banks do not deposit funds at the central bank. They deposit them at the Treasury.
Question 3 - Assume that the government increases spending and finances the expenditures by borrowing in the domestic capital markets. If the nation has low mobility international capital markets and a flexible exchange rate system, what happens to the real GDP and reserve-related (central bank) transactions in the context of the Three-Sector-Model?
a. Real GDP falls, and reserve-related (central bank) transactions become more negative (or less positive).
b. Real GDP falls and reserve-related (central bank) transactions remain the same.
c. Real GDP and reserve-related (central bank) transactions remain the same.
d. Real GDP rises, and reserve-related (central bank) transactions remains the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
Question 4 - Banks deposit funds at the central bank, because:
a. They are needed for check clearing
b. They need them there in order be able to purchase government securities.
c. Actually, banks do not deposit funds at the central bank. They deposit them at the Treasury.
d. All the above.
Question 5 - Assume that the government increases spending and finances the expenditures by borrowing in the domestic capital markets. If the nation has low mobility international capital markets and a flexible exchange rate system, what happens to the real GDP and net nonreserve-related international borrowing/lending in the context of the Three-Sector-Model?
a. Real GDP rises, and net nonreserve-related international borrowing/lending becomes more positive (or less negative).
b. Real GDP rises, and net nonreserve-related international borrowing/lending becomes more negative (or less positive).
c. Real GDP falls, and net nonreserve-related international borrowing/lending becomes more positive (or less negative).
d. Real GDP and net nonreserve-related international borrowing/lending remain the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
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