Suppose Policy Makers Implement an Unexpected Fiscal Expansion

question 36

Multiple Choice

Suppose policy makers implement an unexpected fiscal expansion.Further assume that monetary policy is expected to keep interest rates constant in response to this unexpected fiscal expansion.Given this information,we would expect that

• A)stock prices will rise.
• B)stock prices will remain constant.
• C)this policy will have an ambiguous effect on stock prices.
• D)the effect on stock prices will depend on the slope of the IS curve.

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