What Is the Relationship Between Fiscal Multipliers and the "Zero

question 86

Multiple Choice

What is the relationship between fiscal multipliers and the "zero lower bound"?

• A)Fiscal multipliers cannot fall below zero.
• B)When monetary policy has hit the zero lower bound,fiscal multipliers are likely to be larger than normal.
• C)At the zero lower bound,a fiscal contraction is actually expansionary.
• D)At the zero lower bound,fiscal policy works by shifting the aggregate supply curve,rather than shifting the aggregate demand curve.

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Definitions:

Discount Rate

The interest rate used in discounted cash flow analysis to determine the present value of future cash flows, reflecting the time value of money and risk of the investment.

Working Capital

The amount of available capital that a company has to run its day-to-day operations, calculated as current assets minus current liabilities.

Payback Period

The length of time required for an investment to recover its initial outlay in net cash inflows, an important metric in capital budgeting.

Time Value Of Money

A financial principle stating the value of money is time-dependent, where a dollar today is worth more than a dollar in the future due to its potential earning capacity.