Figure 16-2
Assume that a contractionary monetary policy has shifted the aggregate demand curve in Figure 16-2 from D0D0 to D1D1. Fiscal authorities who wish to restore real GDP to the full-employment level will
a.
run a budget surplus by increasing taxes or cutting government spending.
b.
run a balanced budget to prevent the interest rate from rising and cutting off investment.
c.
run a budget deficit by cutting taxes or increasing government spending.
d.
ignore the change in monetary policy since it has no effect on fiscal policy.
c
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A sudden stop will be easier to navigate if the country borrows internationally in foreign currencies and lend locally in its domestic currency
Indicate whether the statement is true or false
If investment becomes more interest-sensitive,
A) monetary policy will have a smaller impact on the equilibrium interest rate. B) monetary policy will have a greater impact on equilibrium income. C) fiscal policy will have a smaller impact on equilibrium income. D) fiscal policy will have a larger impact on the equilibrium interest rate.
To determine whether an increase in the price of gasoline results in a consumer spending a larger share of their expenditure on gasoline we need to know
A) only how much money the consumer spends on gasoline before the price change B) only the change in the price of gasoline C) only the change in the price of gasoline as a percentage of the original price D) only the own price elasticity of demand for gasoline E) none of the above
Refer to the information provided in Figure 6.5 below to answer the question(s) that follow.
Figure 6.5Refer to Figure 6.5. Molly's budget constraint is BD. If the price of CDs decreases, her new budget constraint becomes
A. EF. B. AO. C. AD. D. CD.