Question

•Temporary changes in fiscal policy are more effective in influencing output and employment in the short...

•Temporary changes in fiscal policy are more effective in influencing output and employment in the short run:

–The rise in aggregate demand and output due to expansionary fiscal policy raises demand for real monetary assets, putting upward pressure on interest rates and on the value of the domestic currency

–To prevent an appreciation of the domestic currency, the central bank must buy foreign assets, thereby increasing the money supply and decreasing interest rates

–In effect, under fixed exchange rates an expansionary fiscal policy leads to an equivalent expansion in monetary policy, resulting in a larger impact on short-run output and no change to exchange rates

Homework Answers

Answer #1

option (d) is the right answer .

Risk premium is the difference between actual return on investment and risk free return on assets . Actual rate of return is associated with risk and that will give the expected return on that assets . Option(a) is right because when there is large debt thene there is possibikity that borrowers may default on loan .Option (b) also gives solid reason for increasr in risk premium as foreign investor will deiversify their portfolio after certain lending amount to hedge risk. Foreign transaction is exposed to the exchange rate where any part can be benefitted or bear loss depending on the foreign exchange market. So, Option (c) is right .

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
expansionary monetary policy ________ real interest rates and ________ output in the short run, thereby ________...
expansionary monetary policy ________ real interest rates and ________ output in the short run, thereby ________ stock prices. a. lowers, rise, lowering b. raises, lowers, loweing c. lowers, raise, raising d. raise, raise, raising
“Expansionary fiscal policy is more effective in influencing the aggregate income level when investment is interest-elastic”....
“Expansionary fiscal policy is more effective in influencing the aggregate income level when investment is interest-elastic”. Do you agree with this statement? Why and why not? Explain your answer based on IS-LM framework.
Short-run contractionary fiscal policy would result in: AD moving to the right. AS moving to the...
Short-run contractionary fiscal policy would result in: AD moving to the right. AS moving to the right. AD moving to the left. AS moving to the left. Stimulus checks and tax changes are all examples of Monetary Policy Fiscal Policy Contractionary Policy Expansionary Policy If the federal government decide a contractionary fiscal policy is ​necessary, what changes should they make in government spending or​ taxes? The federal government should enact policies that decrease government spending and decrease taxes. The federal...
Expansionary monetary policy has short run consequences through its impact on ___________; and long run consequences...
Expansionary monetary policy has short run consequences through its impact on ___________; and long run consequences through its impact on _________. fiscal policy and taxes consumption and investment saving and investment interest rates and output
An expansionary monetary policy would be more effective if it caused Group of answer choices a)...
An expansionary monetary policy would be more effective if it caused Group of answer choices a) interest rates to decrease, leading to an exchange rate depreciation and a rise in net exports. b) interest rates to increase, leading to an exchange rate depreciation and a rise in net exports. c) interest rates to increase, leading to an exchange rate appreciation and a fall in net exports. d) interest rates to decrease, leading to an exchange rate appreciation and a fall...
a. Monetary Policy involves changing taxes and government spending/ the design of currency/ exports/ the money...
a. Monetary Policy involves changing taxes and government spending/ the design of currency/ exports/ the money supply.   In the United States, Monetary Policy is implemented by the Federal Reserve/ President and Congress/ Secretary of the Treasury/ states. b. Contractionary Monetary Policy/ Lower prices/ Expansionary MonetaryPolicy/ Larger coins can be used to address a Recessionary Gap; while Expansionary MonetaryPolicy/ smaller coins/ Contractionary Monetary Policy/ higher prices can be used to address an Inflationary Gap. c.  To enact Contractionary Monetary Policy, the central bank...
33. Which of the following is true for an expansionary fiscal policy? a. It leads to...
33. Which of the following is true for an expansionary fiscal policy? a. It leads to a fall in the interest rate. b. It has no impact on the aggregate output. c. It causes an increase in the aggregate demand. d. It increases the level of imports. 34. An increase in the domestic price level will: a. shift the IS curve to the right. b. shift the LM curve to the right. c. shift the FE curve to the left....
17. The government implements monetary policy and fiscal policy in order to: a. offset the shifts...
17. The government implements monetary policy and fiscal policy in order to: a. offset the shifts in aggregate demand and thereby eliminate unemployment. b. offset shifts in aggregate demand and thereby stabilize the economy. c. enhance the shifts in aggregate demand and thereby create fluctuations in output and employment. d. enhance the shifts in aggregate demand and thereby increase economic growth 20. Which of the following is a way the Fed can change the money supply? a. changing how much...
Suppose the Canadian government decides it wants to use fiscal policy to increase output and employment....
Suppose the Canadian government decides it wants to use fiscal policy to increase output and employment. With the aid of diagrams, carefully explain whether and how an increase in government spending would shift the Aggregate Demand curve in a small open economy. a) with flexible exchange rates b) with fixed exchange rates. Suppose Canada is a small open economy initially in Long Run equilibrium. Then the rest of the world reduces its demand for Canadian-produced goods. Using the AD/AS framework...
40. Under perfect capital mobility and fixed exchange rates, expansionary _____ is a futile attempt because...
40. Under perfect capital mobility and fixed exchange rates, expansionary _____ is a futile attempt because the _____. a. fiscal policy; LM curve effectively is vertical. b. monetary policy; LM curve effectively is the same as the FE curve. c. fiscal policy; interest rate does not change. d. monetary policy; IS curve will shift to the left. 41. The J curve shows that: a. devaluation is more likely to improve the trade balance in the short-run than in the long-run....
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT