Assume that the central bank increases the reserve requirement. If the nation has highly mobile 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. There is not enough information to determine what happens to these two macroeconomic variables.
b. Real GDP falls, and net nonreserve-related international borrowing/lending becomes more positive (or less negative).
c. Real GDP rises, and net nonreserve-related international borrowing/lending becomes more positive (or less negative).
d. Real GDP rises, and net nonreserve-related international borrowing/lending becomes more negative (or less positive).
e. Real GDP falls, and net nonreserve-related international borrowing/lending becomes more negative (or less positive).
Question 2 - Checks are cleared internationally by:
a. First, converting them into the home currency, and then sending them to the appropriate government office (e.g., the Department of Treasury).
b. Sending them to correspondent banks in the home-currency country and then clearing them through normal channels.
c. Sending them to correspondent banks in the home-currency country and then clearing them through FITS (i.e., the Foreign International Transfer Service).
d. Actually, checks are not cleared internationally. Rather, they are cleared in the country in which they are deposited.
e. Sending them to foreign central banks, where they are kept until the end of the year and then settled in bulk with foreign central banks.
Question 3 - Assume that the central bank increases the reserve requirement. 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. Real GDP falls, and nominal value of the domestic currency rises.
b. Real GDP rises, and nominal value of the domestic currency falls.
c. Real GDP rises, and nominal value of the domestic currency rises.
d. Real GDP rises, and nominal value of the domestic currency remains the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
Question 4 - When a 1,000 check written on the Chase Bank is deposited in an account at the Bank of America the:
a. Liabilities of Chase rise by 1,000.
b. Reserves of Chase increase by 1,000.
c. Liabilities of the Bank of America fall by 1,000.
d. Reserves of the Bank of America increase by 1,000.
e. All the above.
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