Which of the Following Situations Illustrates How Monetary Policy Can

question 42

Multiple Choice

Which of the following situations illustrates how monetary policy can influence aggregate demand?

• A)Investors, anticipating an erosion of financial wealth due to inflation, decide to save more.As a result, aggregate demand decreases.
• B)The Bank of Canada raises interest rates so people plan to buy fewer consumer durables.As a result, aggregate demand decreases.
• C)The government increases its expenditures.The demand for loanable funds increases, which raises the real interest rate.Investment increases.
• D)The government reduces the goods and services tax.As a result, consumption expenditure increases and aggregate demand increases.
• E)The exchange rate value of the Canadian dollar rises.As a result, people living near the U.S.- Canada border increase their imports of goods and net exports decrease.

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Definitions:

Net Income

The total profit of a company after all expenses, taxes, and costs have been subtracted from total revenue, indicating the company's actual profitability over a specific period.

Sarbanes-Oxley Act

The Sarbanes-Oxley Act is a United States federal law enacted in 2002 to protect investors by improving the accuracy and reliability of corporate disclosures.

Internal Controls

Procedures and processes implemented by a company to ensure the integrity of financial and accounting information, promote accountability, and prevent fraud.

Documentation

The process of creating, compiling, and maintaining records and detailed information.