An example of an expenditure-switching policy would be

Select one:

a.an increase in a nation's government spending

b.a devaluation of a nation's currency

c.an increase in the domestic money supply

d.lower income tax rates to promote economic recovery

Under conditions of fixed exchange rates and high capital mobility, a nation could best promote recovery from recession by

Select one:

a.increasing government spending

b.reducing its money supply

c.increasing its money supply

d.reducing its money supply

Under a system of fixed exchange rates and high capital mobility, an expansionary fiscal policy is more effective because the initial and secondary effects of the expansionary fiscal policy reinforce each other, so real GDP increases by a greater amount than in a closed economy.

TRUE

FALSE