A nation's country-risk premium increases if: a. Central bank ...

[daltonest1984]

A nation's country-risk premium increases if:
 a. Central bank policies become more predictable.
  b. Expected inflation becomes harder to predict.
  c. Its government becomes more stable.
  d. All of the above.
  e. None of the above

Question 2

Assume that the central bank sells government securities in the open market. If the nation has highly mobile international capital markets and a fixed exchange rate system, what happens to the real risk-free interest rate and GDP Price Index in the context of the Three-Sector-Model? State your answer after the macroeconomic system returns to complete equilibrium.
 a. The real risk-free interest rate rises and GDP Price Index rises.
  b. The real risk-free interest rate falls and GDP Price Index falls.
  c. The real risk-free interest rate rises and GDP Price Index falls.
  d. The real risk-free interest rate and GDP Price Index remain the same.
  e. There is not enough information to determine what happens to these two macroeconomic variables.

[epscape]

Answer to Question 1

.B

Answer to Question 2

.D