Use the Following to Answer Questions

question 131

Multiple Choice

Use the following to answer questions:
-(Figure: Fiscal Policy with a Fixed Money Supply) Refer to Figure: Fiscal Policy with a Fixed Money Supply. Assume that this economy is at E₁. Now government deficit spending is increased, but the Federal Reserve does NOT expand the money supply. According to this model:

• A) real GDP will expand just as much as if the Federal Reserve had expanded the money supply.
• B) real GDP will decrease because the Federal Reserve did not expand the money supply.
• C) real GDP will expand, but not as much as if the Federal Reserve had expanded the money supply.
• D) interest rates will decrease.

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Definitions:

Financial Disclosures

Information provided by a company to its stakeholders about its financial health, performance, and risks, typically found in annual reports and financial statements.

Economic Incentive

A financial or non-financial reward offered to encourage or discourage specific behaviors or actions by individuals or companies.

Raise Capital

The process by which a company or organization generates funds to finance its operations or growth, often through the sale of equity or debt securities.

Economic Incentive

A financial or non-financial reward offered to encourage or discourage certain behaviors or actions within an economy.