Assume that the central bank increases the reserve requirement. If the nation has low mobility international capital markets and a flexible exchange rate system, what happens to 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 remain the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
Question 2 - Which of the following is not a benefit to lenders/investors of financial intermediation?
a. Higher yield than the direct market.
b. Lower risks than the direct market.
c. More diversification than the direct market.
d. All the above are benefits to lenders.
e. Lower transaction costs than the direct market.
Question 3 - Assume that the central bank increases the reserve requirement. If the nation has low mobility international capital markets and a flexible exchange rate system, what happens to 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 remain the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
Question 4 - Which of the following is not a benefit to lenders/investors of financial intermediation?
a. Lower transaction costs than the direct market.
b. Lower risks than the direct market.
c. More diversification than the direct market.
d. More convenient than the direct market.
e. Higher yield than the direct market.
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