Fiscal Expansion Under Fixed Exchange Rates Will Have What Temporary

question 51

Multiple Choice

Fiscal expansion under fixed exchange rates will have what temporary effect?

• A) the money supply will decrease
• B) output will decrease
• C) the exchange rate will increase
• D) the exchange rate will decrease
• E) there will be no effect

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Definitions:

Optimal Consumption Bundle

The consumption bundle that maximizes a consumer’s total utility given that consumer’s budget constraint.

Budget Constraint

The limitation on the consumption bundles that a consumer can afford, based on income and prices.

Marginal Utility

The additional satisfaction or benefit (utility) that a consumer derives from buying an additional unit of a commodity or service.

Iced Tea

A chilled form of tea, often sweetened and served with ice, popular as a refreshing beverage.