Exam 17: Macroeconomic Policy and Floating Exchange Rates

All of the following are tools of macroeconomic policy except:

The demand for loanable funds is composed of both public and private sector demands for funds to borrow.

The demand for loanable funds is:

Monetary policy entails:

In an open economy with flexible exchange rates, expansionary monetary policy is highly effective in changing real GDP.

A contractionary fiscal policy:

Why is fiscal policy relatively ineffective if exchange rates are allowed to adjust to their equilibrium level?

An expansionary monetary policy tends to lead to lower interest rates.

With flexible exchange rates there is no possibility of an inconsistent policy mix between fiscal and monetary policy.

A contractionary fiscal policy:

Which of the following is usually associated with an expansionary monetary policy?

In a closed economy, an expansionary monetary policy:

In an open economy, contractionary fiscal policy causes:

As a government adopts an expansionary fiscal policy:

The conflicting effects of an expansionary fiscal policy are that:

The effect of a depreciation of the domestic currency on the trade balance is likely to:

Which of the following is not associated with an expansionary monetary policy?

In an open economy, an expansionary monetary policy causes:

Fiscal policy refers to the government's ability to change spending and taxation to affect the level of economic activity.

Flexible exchange rates tend to reduce the effectiveness of monetary policy.