Which of the Following Is Correct

question 36

Multiple Choice

Which of the following is correct?

• A) Contractionary fiscal and monetary policies both increase the interest rate, appreciate the domestic currency, and increase the trade deficit.
• B) Contractionary fiscal policy reduces the interest rate, depreciates domestic currency, and reduces the trade deficit; contractionary monetary policy does the opposite.
• C) Contractionary monetary policy reduces the interest rate, depreciates domestic currency, and reduces the trade deficit; contractionary fiscal policy does the opposite.
• D) Only contractionary monetary policy has any effect on international variables.
• E) Only contractionary fiscal policy has any effect on international variables.

---

Definitions:

Gross Private Domestic Investment

The total capital investment in an economy by private sector entities, excluding government spending.

Durable Goods

Goods not for immediate consumption that can be used over a period of time, such as appliances, cars, and furniture.

Business Inventories

The stocks of goods and materials that firms hold for the purpose of sale or input into production, often used to meet consumer demand or continue production.

Welfare Benefits

Financial assistance provided by the government to individuals or groups in need, aiming to support well-being and economic stability.