1. Two analysts make the following statements:

Analyst 1: Monetary policy seeks to influence the macro economy by influencing the quantity of money and credit in the economy. On the other hand, fiscal policy involves the use of government spending and taxation to influence economic activity.
Analyst 2: Fiscal policy seeks to influence the macro economy by influencing the quantity of money and credit in the economy. On the other hand, monetary policy involves the use of government spending and taxation to influence economic activity.

Which analyst is most likely correct?

A. Analyst 1.
B. Analyst 2.
C. Neither.

 

2. Which of the following is most likely correct about the quantity equation of exchange?

A. The velocity of money is assumed to be approximately constant.
B. The spending, P * V, is approximately proportional to quantity of money, M.
C. If money neutrality holds, an increase in the money supply, M, affects Y, real output.

 

3. What is the most likely economic outcome if expansionary fiscal policy is combined with contractionary monetary policy?

A. Higher aggregate demand and higher interest rates, government spending increases.
B. Lower aggregate demand, higher interest rates, and government spending decreases.
C. Higher aggregate demand, lower interest rates, and government spending increases.

 

Answers: SelectShow

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