Determine the real risk-free interest rate

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Reference no: EM1367194

The central bank reduce the discount to rise the nation's monetary base. The nation has highly mobile international capital markets and a fixed exchange rate system. Use the three sector model to solve the following problems.

12.1. The real risk-free interest rate will _____ and the quantity of loanable funds per period of time will ______.
A. fall, rise
B. rise, fall
C. fall, fall
D. rise, rise

Reference no: EM1367194

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