Author Question: A nation's market-risk premium rises if: a. The volatility (e.g., standard deviation) of expected ... (Read 63 times)

APUS57 · **on:** Jun 30, 2018

A nation's market-risk premium rises if:
a. The volatility (e.g., standard deviation) of expected inflation rises.
b. The average expected inflation rate rises.
c. Security maturities lengthen.
d. All 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 real GDP and monetary base in the context of the Three-Sector-Model? State your answer after the macroeconomic system returns to complete equilibrium.
a. Real GDP rises and monetary base rises.
b. Real GDP rises and monetary base falls.
c. Real GDP and monetary base fall.
d. Real GDP and monetary base remain the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.