Author Question: Assume that foreign capital flows from a nation increase due to political uncertainly and increased ... (Read 161 times)

clippers! · **on:** Jun 30, 2018

Assume that foreign capital flows from a nation increase due to political uncertainly and increased risk. 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?
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.

Question 2

In a market socialist economy
a. Resources are allocated by the market
b. Property is owned by the state or by collectives
c. Information is centralized
d. There are no public choices
e. Both a and b