If banks pay back their borrowings from the central bank: a. The ...

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If banks pay back their borrowings from the central bank:
 a. The monetary base will decrease.
  b. Excess reserves will rise.
  c. The M2 multiplier will fall.
  d. The monetary base will rise.

Question 2

Assume that the government increases spending and finances the expenditures by borrowing in the domestic capital markets. 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 the nominal value of the domestic currency in the context of the Three-Sector-Model?
 a. The real risk-free interest rate rises, and nominal value of the domestic currency falls.
  b. The real risk-free interest rate falls, and nominal value of the domestic currency falls.
  c. The real risk-free interest rate rises, and nominal value of the domestic currency remains the same.
  d. The real risk-free interest rate rises, and nominal value of the domestic currency rises.
  e. There is not enough information to determine what happens to these two macroeconomic variables.

[Madisongo23]

Answer to Question 1

.A

Answer to Question 2

.A

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Gracias!

[Alyson.hiatt@yahoo.com]

Excellent