Assume that the government increases spending and finances the expenditures by borrowing in the domestic capital markets. 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 reserve-related (central bank) transactions in the context of the Three-Sector-Model?
a. The quantity of real loanable funds per time period falls, and reserve-related (central bank) transactions remain the same.
b. The quantity of real loanable funds per time period rises, and reserve-related (central bank) transactions become more positive (or less negative).
c. The quantity of real loanable funds per time period falls, and reserve-related (central bank) transactions become more negative (or less positive).
d. The quantity of real loanable funds per time period rises, and reserve-related (central bank) transactions remain the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
Question 2 - Answer the following question based on the information given below: Deposits at the central bank = 400 U.S. Government Securities = 700 Checking Deposit = 1,800 Loans = 800 Stockholder's Equity = 70 Other Assets = 450 Other Liabilities = 380 Borrowing from the central bank = 250 Cash in the Vault = 150 If the reserve requirement is 10, the level of excess reserves equals:
a. 495
b. 370
c. 300
d. 550
e. Cannot be determined with this information.
Question 3 - Assume that the government increases spending and finances the expenditures by borrowing in the domestic capital markets. 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 current international transactions in the context of the Three-Sector-Model?
a. The quantity of real loanable funds per time period rises, and current international transactions become more negative (or less positive).
b. There is not enough information to determine what happens to these two macroeconomic variables.
c. The quantity of real loanable funds per time period and current international transactions remain the same.
d. The quantity of real loanable funds per time period rises, and current international transactions remain the same.
e. The quantity of real loanable funds per time period rises, and current international transactions become more positive (or less negative).
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