EU27L2
1
The first round effects of expansionary fiscal policy include ___________________.
an increase in investment
a decrease in the interest rate
an increase in the interest rate
an increase in real GDP
2
The second round effects of expansionary fiscal policy include _______ in the demand for money, _______ in the interest rate, and _______ in interest-sensitive expenditure.
a decrease; an increase; a decrease
an increase; a decrease; an increase
an increase; an increase; a decrease
a decrease; an increase; an increase
3
In an open economy, expansionary fiscal policy results in _____________.
a rise in the interest rate and a fall in the exchange rate
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
4
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 the interest rate
a decrease in interest-sensitive expenditure
5
The second round effects of expansionary monetary policy include ___________________.
an increase in the interest rate equal to the first-round decrease
an increase in the interest rate that is less than the first-round decrease
a decrease in the interest rate that is less than the first-round increase
a decrease in the interest rate equal to the first-round increase
6
If expenditure is very responsive to a change in the interest rate, the crowding out effect is _______ and fiscal policy is relatively _______.
small; effective
small; ineffective
large; effective
large; ineffective
7
The _______ responsive the quantity of money demanded to ______________, the ______ effective is monetary policy.
more; the interest rate; more
more; the interest rate; less
less; the interest rate; less
less; real GDP; less
8
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 _______________.
modern Keynesian
Keynesian
monetarist
Chancellor of the Exchequer
9
Starting at full employment, an increase in the quantity of money will in the long run _______________.
increase the price level and leave real GDP unchanged
increase real GDP and leave the price level unchanged
decrease the price level and leave real GDP unchanged
increase the price level and increase real GDP
10
Expansionary fiscal policy _______ consumption expenditure and _______ investment. Expansionary monetary policy _______ consumption expenditure and _______ investment.
increases; decreases; increases; increases
increases; decreases; increases; decreases
a decreases; increases; increases; decreases
increases; increases; increases; decreases