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Under a zero lower bound situation, what is true regarding expansionary fiscal (e.g. increase in government spending) and monetary policies (e.g. increase in money supply)
Under a zero lower bound situation, what is true regarding expansionary fiscal (e.g. increase in government spending) and monetary policies (e.g. increase in money supply) under different exchange rate regimes? Question 3 Select one: a. Under a fixed exchange rate, an expansionary monetary policy is more effective than an expansionary fiscal policy as the latter may be accompanied with crowding out effects. b. Under a floating exchange rate, an expansionary monetary policy is more effective than an expansionary fiscal policy as the latter may be accompanied with crowding out effects. c. Under a fixed exchange rate, an expansionary fiscal policy is not compatible with the open macro trilemma. d. Regardless of the exchange rate regime, fiscal expansion is equally powerful as a stabilization policy. e. Government spending multiplier under liquidity trap tends to be less than one
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