Suppose that the economy is currently at full employment. All other things being equal, if the government implements expansionary fiscal policy, then the appropriate monetary policy is
A. no change from the current policy.
B. reduce the growth of the money supply.
C. constant growth of the money supply.
D. increase the growth of the money supply.
Answer: B
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What are the two important properties of all models?
What will be an ideal response?
The change in total utility arising from a one-unit increase in consumption of a good is referred to as
a. average utility b. the principle of diminishing marginal utility c. real income d. marginal utility e. price
If fluctuations in economic activity emanate from the supply side, higher rates of inflation will be associated with higher rates of unemployment, and lower rates of inflation will be associated with lower rates of unemployment.
Answer the following statement true (T) or false (F)
The nominal interest rate in the U.S. is 5% and the nominal interest rate in Canada is 3%. The spot value of the U.S. dollar is 1 ($/Canadian dollar) and the forward rate is 1.2 ($/Canadian dollar). Calculate the forward discount or premium for the dollar. Does the interest parity condition hold? If not explain what is likely to occur in foreign exchange markets. Assume that interest rates cannot
change. What will be an ideal response?