If the Bank of Canada Maintains a Fixed Exchange Rate

question 93

Multiple Choice

If the Bank of Canada maintains a fixed exchange rate, which effect will an expansionary fiscal policy have?

• A) It will cause a large and permanent rightward shift in the AD curve.
• B) It will cause a large and permanent leftward shift in the AD curve.
• C) It will have no permanent effect on the position of the AD curve, but it will cause interest rates to rise.
• D) It will have no permanent effect on either the position of the AD curve or the interest rate.

Apply the principle of marginal social benefit being equal to the sum of individual marginal benefits in determining the efficient provision of public goods.

Understand how the free-rider problem affects the provision of public goods.

Analyze conditions under which public goods should be provided to enhance social welfare.

Calculate the efficient number of public goods based on marginal cost and marginal social benefit.

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Definitions:

Productive

The quality of being able to produce a substantial amount of goods, services, or crops efficiently and effectively.

Self-Disciplined

The ability to control one’s feelings, impulses, and actions, and to pursue goals with perseverance and determination.

Middle-Class Culture

Describes the values, norms, and practices of the middle class, often associated with economic stability, education, and manners.

Reform

The process of making changes to something in order to improve it, especially in social, political, or economic institutions or practices.