Fiscal Expansion Under a Fixed Exchange Has What Effect(s) on the Economy

question 53

Multiple Choice

Fiscal Expansion under a fixed exchange has what effect(s) on the economy:

• A) the money supply decreases.
• B) output decreases.
• C) the exchange rate increases.
• D) the exchange rate decreases initially but then returns to its original point.
• E) output is unchanged.

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Definitions:

Adam Smith

A Scottish economist and philosopher, best known for his works "The Wealth of Nations," which laid the foundations for classical economics.

The Wealth of Nations

A seminal book by Adam Smith that laid the foundations of classical economics, emphasizing free markets, the division of labor, and the function of self-interest in commerce.

Free Economy

An economic system where transactions are under the control of private owners for profit rather than by the state.

Utilitarianism

A theory in normative ethics holding that the best action is the one that maximizes utility, often defined as maximizing happiness and reducing suffering.