1. Given the discussion of the effects of fiscal policy in this chapter, if the central bank does not change the policy rate, a foreign fiscal expansion is likely to __________.A.increase foreign output and not change the foreign exchange rate. B.increase foreign output and decrease the foreign exchange rate. C.decrease foreign output and not change the foreign exchange rate. D.decrease both foreign output and the foreign exchange rate. 2.) Given the discussion of the effects of monetary policy in this chapter, a foreign monetary expansion is likely to __________.A.decrease foreign output and increase the foreign interest rate. B.increase foreign output and decrease the foreign interest rate. C.decrease both foreign output and the foreign interest rate. D.increase both foreign output and the foreign interest rate. 3.) Given the discussion of the effects of fiscal policy in this chapter, how does a foreign fiscal expansion affect domestic output if the domestic central bank does not change the policy rate? A.A foreign fiscal expansion has an ambiguous effect on domestic output. B.A foreign fiscal expansion is likely to decrease domestic output. C.A foreign fiscal expansion is likely to increase domestic output. D.A foreign fiscal expansion has no effect on domestic output.

Fiscal policy refers to the use of government disbursement and tax policies to influence economic…

Answered: 1. Given the discussion of the effects…

Principles of Economics (MindTap Course List)

8th Edition

ISBN:9781305585126

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter36: Six Debates Over Macroeconomic Policy

Section: Chapter Questions

Problem 3PA

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1. Given the discussion of the effects of fiscal policy in this chapter, if the central bank does not change the policy rate, a foreign fiscal expansion is likely to __________.

increase foreign output and not change the foreign exchange rate.

increase foreign output and decrease the foreign exchange rate.

decrease foreign output and not change the foreign exchange rate.

decrease both foreign output and the foreign exchange rate.

2.) Given the discussion of the effects of monetary policy in this chapter, a foreign monetary expansion is likely to __________.

decrease foreign output and increase the foreign interest rate.

increase foreign output and decrease the foreign interest rate.

decrease both foreign output and the foreign interest rate.

increase both foreign output and the foreign interest rate.

3.)

Given the discussion of the effects of fiscal policy in this chapter, how does a foreign fiscal expansion affect domestic output if the domestic central bank does not change the policy rate?

A foreign fiscal expansion has an ambiguous effect on domestic output.

A foreign fiscal expansion is likely to decrease domestic output.

A foreign fiscal expansion is likely to increase domestic output.

A foreign fiscal expansion has no effect on domestic output.

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