In the Keynesian Model,the Difference Between Using Monetary and Fiscal

question 59

Multiple Choice

In the Keynesian model,the difference between using monetary and fiscal policy to eliminate a recession is that

• A)monetary policy will eliminate a recession quicker than fiscal policy will.
• B)fiscal policy will eliminate a recession quicker than monetary policy will.
• C)an expansionary monetary policy will leave the economy with a lower real interest rate than an expansionary fiscal policy.
• D)an expansionary fiscal policy will leave the economy with a lower real interest rate than an expansionary monetary policy.

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Definitions:

Inflation Expectations

The anticipations of consumers and businesses about the rate at which prices for goods and services will rise in the future.

Unemployment

The situation when individuals who are actively seeking work are unable to find employment.

Sacrifice Ratio

The cost of reducing inflation in terms of the amount of output or gross domestic product that is foregone.

Inflation

The tempo at which the comprehensive price tags for goods and services grow, depleting the shopping power.