When Comparing Monetary and Fiscal Policy Under Fixed and Floating

question 79

Multiple Choice

When comparing monetary and fiscal policy under fixed and floating exchange rate regimes, which of the following statements is FALSE?

• A) In a floating exchange rate regime, an expansionary monetary policy is effective by stimulating spending and by depreciating the currency.
• B) In a floating exchange rate regime, an expansionary fiscal policy is effective by stimulating spending, though there may be crowding-out effects due to higher rates of interest and currency appreciation.
• C) In a fixed exchange rate regime, an expansionary monetary policy is effective by stimulating spending; it has no impact on the currency value or the trade balance.
• D) In a fixed exchange rate regime, an expansionary fiscal policy is effective by stimulating spending, as long as the parallel expansionary monetary policy keeps exchange rates stable.

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Definitions:

Office Supplies

Items used in offices on a regular basis for the purpose of carrying out tasks; includes items like pens, paper, and staplers.

Unearned Revenue

Money received by a company for goods or services yet to be delivered or performed, recognized as a liability on the balance sheet.

Trial Balance

A statement that lists all the balances of the ledger accounts, used to verify that the total of debit balances equals the total of credit balances.

General Journal

An accounting book where all transactions are initially recorded, based on the double-entry bookkeeping system, before being transferred to specific accounts.