When comparing monetary and fiscal policy under fixed and floating exchange rate regimes, which of the following statements is FALSE?
A) In a floating exchange rate regime, an expansionary monetary policy is effective by stimulating spending and by depreciating the currency.
B) In a floating exchange rate regime, an expansionary fiscal policy is effective by stimulating spending, though there may be crowding-out effects due to higher rates of interest and currency appreciation.
C) In a fixed exchange rate regime, an expansionary monetary policy is effective by stimulating spending; it has no impact on the currency value or the trade balance.
D) In a fixed exchange rate regime, an expansionary fiscal policy is effective by stimulating spending, as long as the parallel expansionary monetary policy keeps exchange rates stable.
Ans: C) In a fixed exchange rate regime, an expansionary monetary policy is effective by stimulating spending; it has no impact on the currency value or the trade balance.
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As the circular flow model shows, the factors of production flow from
A) households to firms through the factor market. B) firms to households through the goods market. C) the goods market through firms to the factor markets. D) households to firms through the goods market. E) firms to households through the factor market.
An increase in the interest rate is an increase in the opportunity cost of consuming in the future.
Answer the following statement true (T) or false (F)
In order to reduce or eliminate a chronic shortage in the market for a currency under a fixed exchange rate system, we must devalue the currency
Indicate whether the statement is true or false
The degree of a factor's specificity is inversely related to
A) the mobility of the factor, with more mobile factors having less specificity. B) the amount of time required to redeploy the factor to a different industry. C) the cost of the factor as a proportion of the long-run total cost of production. D) technology differences between two countries, with a less advanced technology resulting in less factor specificity. E) factor quality, with lower quality factors having a lower level of specificity.