Fiscal Policy That Increases the Budget Deficit Has the Same

question 35

Multiple Choice

Fiscal policy that increases the budget deficit has the same impact upon equilibrium output as does a(n) :

• A)contractionary monetary policy
• B)increase in saving
• C)decrease in investment
• D)increase in imports
• E)decrease in imports

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Definitions:

Monetary Policy

A central bank’s changing of the money supply to influence interest rates and assist the economy in achieving price-level stability, full employment, and economic growth.

U.S. Federal Reserve

The central banking system of the United States, responsible for monetary policy, regulating banks, maintaining financial stability, and providing banking services.

Bank of Japan

The central bank of Japan, responsible for issuing currency, implementing monetary policy, and maintaining the stability of the Japanese financial system.

Interest Rates

The cost of borrowing money or the return on savings, typically expressed as an annual percentage.