Under a Flexible Exchange Rate System, Expansionary Fiscal Policy

question 11

Multiple Choice

Under a flexible exchange rate system, expansionary fiscal policy

• A)cannot change the level of consumption
• B)is very effective because crowding out cannot occur
• C)has no effect on the trade balance
• D)will cause a deterioration of the trade balance
• E)always has to be supplemented by restrictive monetary policy

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Definitions:

Manufacturing Overhead

All the indirect costs associated with producing a product, excluding the direct costs of labor and materials.

Electrical Motor

A device that converts electrical energy into mechanical energy, commonly used in various applications to drive machinery.

Fixed Manufacturing Overhead

This refers to the consistent costs associated with the manufacturing process that do not vary with the level of production, such as salaries of managers and depreciation of factory equipment.

Overapplied

A situation where the allocated manufacturing overhead cost is greater than the actual overhead incurred.