Assume that the central bank purchases government securities in the open market. If the nation has low mobility international capital markets and a flexible exchange rate system, what happens to the real risk-free interest rate and reserves account in the context of the Three-Sector-Model?
a. The real risk-free interest rate falls, and reserves account becomes more negative (or less positive).
b. The real risk-free interest rate falls, and reserves account becomes more negative (or less positive).
c. The real risk-free interest rate falls, and reserves account remain the same.
d. The real risk-free interest rate rises, and reserves account remains the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
Question 2
Bitcoin is a:
a. Virtual currency that can be converted freely into a wide variety of real-world (legal tender) currencies.
b. Virtual currency that keeps track of owners and users by means of a clearing house called Mt. Gox.
c. Virtual currency that publishes all Bitcoin-related domestictransaction s online but keeps its international transactions confidential. This has led to Bitcoin's widespread use for illegal international (not domestic) transactions.
d. All of the statements above are true.
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