The Use of Expansionary or "Easy" Fiscal Policy by a Country's

question 26

Multiple Choice

The use of expansionary or "easy" fiscal policy by a country's government in a situation of fixed exchange rates will, other things equal, initially lead to __________ of the country's current account balance (or trade balance) ; if short-term financial capital is relatively mobile between countries (i.e., the BP curve is flatter than the LM curve) , the policy initially __________ of the country's capital/financial account balance.

• A) an improvement; also leads to an improvement
• B) an improvement; leads to a deterioration (or worsening)
• C) a deterioration (or worsening); leads to an improvement
• D) a deterioration (or worsening); also leads to a deterioration (or worsening)

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Definitions:

Synergistic Benefits

The enhancements or improvements in performance, value, or effectiveness resulting from the merger or collaboration of two entities or systems.

Incremental Value

The additional benefit or cost that arises from a specific decision or action compared to an alternative.

Equity-Financed

A way of raising capital through the sale of shares in the company, thus granting shareholders partial ownership.

Synergy Value

The additional value created by combining two companies, where their joint operation is more valuable than the sum of their parts operating independently.