Question
I would like to get a good explanation of these exercises the answers are correct but I don't understand them ( Fiscal policy?, Monetary Policy
I would like to get a good explanation of these exercises the answers are correct but I don't understand them ( Fiscal policy?, Monetary Policy ?,...)
Also I would like to know what is Gresham's Law
1) Time lags present a problem for fiscal policy but nor for monetary policy.
False Time lags affect both fiscal policy and monetary policy.
2) An increase in the bank rate will tend to expand economic activity.
False An increase in the bank rate will tend to contract economic activity and not to expand economic activity.
3) The bank of Canada tries to combat inflation with restrictive monetary policy.
True Restrictive monetary policy: increasing interest rates or decreasing the supply of money
An anti-inflationary monetary policy is:
a) An increase in the rate of interest
b) A reduction in government spending
c) An increase in taxes
d) All of the above ( the answer )
4) Automatic stabilizers include:
a) Progressive personal income taxes
b) Assistance to agriculture in the form of subsidies to farmers 2
c) Unemployment compensation
d) None of the above ( the answer )
5) A contractionary fiscal policy involves:
a) A reduction in taxes and a decrease in interest rates
b) An increase in taxes and a reduction in government spending ( the answer )
c) An increase in government spending and a reduction in taxes
d) A reduction in the money supply and an increase in interest rates
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