Which of the following conclusions is not supported by the Three-Sector-Model?
a. A decrease in borrowing causes the real risk-free interest rate to fall and equilibrium quantity of real loanable funds to fall.
b. An increase in the supply of a nation's real loanable funds reduces the real risk-free interest rate and increases the equilibrium quantity of real loanable funds.
c. An increase in a nation's demand for goods and services within the intermediate range results in an increase in the real GDP and a higher GDP Price Index.
d. An increase in the value of a nation's currency encourages domestic exports and discourages imports.
e. All of the above are supported by the Three-Sector Model.
Question 2
Currencies that are not backed by precious metals of equal value are called:
a. Legal tender.
b. Trouble with a capital T.
c. Near money.
d. Repurchase agreements.
e. Fiat money.
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