Under Which Circumstance Does a Change in Government Spending Have

question 47

Multiple Choice

Under which circumstance does a change in government spending have the largest effect on the real interest rate?

• A) A monetary policy targeted at a constant monetary base with checking accounts paying no interest
• B) A monetary policy targeted at a constant interest rate with checking accounts paying no interest
• C) A monetary policy targeted at a constant money supply with checking accounts paying competitive interest rates
• D) A monetary policy targeted at a constant monetary base with checking accounts paying competitive interest rates
• E) Either a or d depending on macroeconomic conditions

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Definitions:

Opportunity Cost

Opportunity cost is the loss of potential gain from other alternatives when one alternative is chosen.

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The capital city of France, known for its significant cultural, historical, and economic contributions to the world.

Marginal Analysis

An examination of the benefits and costs of an additional unit of consumption or production to help make economic decisions.