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 GDP Price Index and net nonreserve-related international borrowing/lending in the context of the Three-Sector-Model?
a. The GDP Price Index rises, and net nonreserve-related international borrowing/lending becomes more positive (or less negative).
b. The GDP Price Index falls, and net nonreserve-related international borrowing/lending becomes more positive (or less negative).
c. The GDP Price Index falls, and net nonreserve-related international borrowing/lending becomes more negative (or less positive).
d. There is not enough information to determine what happens to these two macroeconomic variables.
e. The GDP Price Index and net nonreserve-related international borrowing/lending remain the same.
Question 2 - 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 fall by 1,000.
b. Reserve assets of Chase increase by 1,000.
c. Liabilities of the Bank of America fall by 1,000.
d. Reserves of the Bank of America fall by 1,000.
e. All the above.
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 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 rises, and reserve-related (central bank) transactions remain the same.
c. There is not enough information to determine what happens to these two macroeconomic variables.
d. The GDP Price Index falls, and reserve-related (central bank) transactions remain the same.
e. The GDP Price Index and reserve-related (central bank) transactions remain the same.
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 fall by 1,000.
c. Liabilities of the Bank of America fall by 1,000.
d. Reserves of the Bank of America fall by 1,000.
e. All the above.
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