The first round effects of expansionary fiscal policy include ___________________.

an increase in investment
an increase in the interest rate
an increase in real GDP
a decrease in the interest rate

The second round effects of expansionary fiscal policy include _______ in the demand for money, _______ in the interest rate, and _______ in interest-sensitive expenditure.

an increase; a decrease; an increase
a decrease; an increase; an increase
a decrease; an increase; a decrease
an increase; an increase; a decrease

In an open economy, expansionary fiscal policy results in _____________.

a fall in the interest rate and a rise in the exchange rate
a fall in the exchange rate and an increase in net exports
a rise in the exchange rate and a decrease in net exports
a rise in the interest rate and a fall in the exchange rate

The first round effects of expansionary monetary policy include ______________________.

an increase in the demand for money
a decrease in the quantity of money demanded
a decrease in interest-sensitive expenditure
a decrease in the interest rate

The second round effects of expansionary monetary policy include ___________________.

a decrease in the interest rate equal to the first-round increase
a decrease in the interest rate that is less than the first-round increase
an increase in the interest rate that is less than the first-round decrease
an increase in the interest rate equal to the first-round decrease

If expenditure is very responsive to a change in the interest rate, the crowding out effect is _______ and fiscal policy is relatively _______.

large; effective
small; effective
small; ineffective
large; ineffective

The _______ responsive the quantity of money demanded to ______________, the ______ effective is monetary policy.

less; real GDP; less
more; the interest rate; more
more; the interest rate; less
less; the interest rate; less

An economy is consistently at a below full employment equilibrium. Joe, the economist, recommends that the government decrease taxes and increase transfer payments, but he is indifferent to policies of the central bank. Joe is most likely a _______________.

Keynesian
modern Keynesian
finance minister
monetarist

Starting at full employment, an increase in the quantity of money will in the long run _______________.

a decrease the price level and leave real GDP unchanged
increase the price level and increase real GDP
increase real GDP and leave the price level unchanged
increase the price level and leave real GDP unchanged

Expansionary fiscal policy _______ consumption expenditure and _______ investment. Expansionary monetary policy _______ consumption expenditure and _______ investment.

a decreases; increases; increases; decreases
increases; increases; increases; decreases
increases; decreases; increases; decreases
increases; decreases; increases; increases

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