A nation's monetary base changes when:
a. Central banks swap currencies with each other.
b. Funds cross our imaginary line.
c. The central bank reduces the reserve requirement.
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 quantity of real loanable funds per time period and reserve-related (central bank) 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 quantity of real loanable funds per time period rises, and reserve-related (central bank) transactions remains the same.
c. The quantity of real loanable funds per time period rises, and reserve-related (central bank) transactions become more positive (or less negative).
d. The quantity of real loanable funds per time period falls, and reserve-related (central bank) transactions become more negative (or less positive).
e. The quantity of real loanable funds per time period and reserve-related (central bank) transactions remain the same.
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