SECTION 4: TRUE OR FALSE OR UNCERTAIN 25. According to the classical macroeconomic model, expansionary fiscal policy has an inflationary effect. 26. Assuming that you have free capital mobility and fixed exchange rate policy, then fiscal policy has a positive effect on output 27. Expansionary fiscal policy always has a depreciating effect on the domestic exchange rate. 28. According to the relative income hypothesis, the savings rate is a non-linear function of the ratio of current to previous peak income. 29. In the IS-LM-BOP model, macroeconomic adjustments occur through changes in money supply if the country adopts a fixed exchange rate regime. 30. According to the impossible trinity, a country that has a liberalized capital account and independent monetary policy will also achieve a stable exchange rate.

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