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.

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Definitions:

Price

The amount of money required to purchase a good or service; determined by factors such as demand, supply, and production cost.

Shutdown Point

The lowest point on the average variable cost curve. When price falls below the minimum point on AVC, total revenue is insufficient to cover variable costs and the firm will shut down and bear losses equal to fixed costs.

Farmer

An individual engaged in agriculture, raising living organisms for food or raw materials, typically leading the operation of farms or animal husbandry.

Price

The amount of money required to purchase a good or service.