If Congress and the president pursue an expansionary fiscal policy at the same time as the Federal Reserve pursues an expansionary monetary policy, how might the expansionary monetary policy affect the extent of crowding out in the short run?

What will be an ideal response?


An expansionary fiscal policy will cause the equilibrium rate of interest to increase. An expansionary monetary policy will cause the equilibrium rate of interest to decrease. An expansionary monetary policy will therefore lessen the effect of crowding out in the short run.

Economics

You might also like to view...

The process by which union and management representatives negotiate a mutually agreeable contract specifying wages, benefits, and working conditions is called

a. collective bargaining b. mediation c. arbitration d. striking e. litigation

Economics

Countries that enjoy long distance flows of goods, capital, and services as well as information and perceptions that accompany market exchanges would be categorized under _____ globalization

a. ethical b. cultural c. social d. economic e. political

Economics

To an economist, money is a synonym for which of the following?

A) income B) credit C) wealth D) salary E) none of the above

Economics

Suppose that a well-respected study published in Child Psychology Today finds that a very high proportion of children raised by stay-at-home fathers are accepted to Harvard University. If a large number of previously working fathers quit their jobs and become stay-at-home dads, which of the following will occur, all else equal? (i) The unemployment rate will decrease. (ii) The size of the labor

force will decrease. (iii) The number of unemployed people will increase. (iv) The unemployment rate will increase. a. (i) and (ii) only b. (ii) and (iv) only c. (i), (ii), and (iii) only d. (ii), (iii), and (iv) only

Economics