If interest rates fall, the M2 money multiplier:
a. Does not change.
b. Rises because C/D and U/D rise, and N/D falls.
c. Falls because C/D and U/D fall, and N/D falls.
d. Falls because C/D, U/D, and N/D rise.
e. Falls because C/D and U/D rise, and N/D falls.
Question 2
Assume that the central bank increases the reserve requirement. If the nation has highly mobile international capital markets and a flexible exchange rate system, what happens to the quantity of real loanable funds per time period and real GDP in the context of the Three-Sector-Model?
a. The quantity of real loanable funds per time period and real GDP remain the same.
b. There is not enough information to determine what happens to these two macroeconomic variables.
c. The quantity of real loanable funds per time period falls, and real GDP falls.
d. The quantity of real loanable funds per time period rises, and real GDP falls.
e. The quantity of real loanable funds per time period falls, and real GDP rises.
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