Central banks can increase the money supply by: a. Buying ...

[mspears3]

Central banks can increase the money supply by:
 a. Buying government securities.
  b. Selling foreign exchange.
  c. Raising margin requirements.
  d. All of the above.
  e. None of the above.

Question 2

Assume that the central bank purchases government securities in the open market. If the nation has highly mobile international capital markets and a flexible exchange rate system, what happens to the real risk-free interest rate and current international transactions in the context of the Three-Sector-Model?
 a. There is not enough information to determine what happens to these two macroeconomic variables.
  b. The real risk-free interest rate falls, and current international transactions become more positive (or less positive).
  c. The real risk-free interest rate rises, and current international transactions remain the same.
  d. The real risk-free interest rate rises, and current international transactions become more positive (or less negative).
  e. The real risk-free interest rate and current international transactions remain the same.

[fromAlphatoOmega22]

Answer to Question 1

.A

Answer to Question 2

.B