QUESTION 5 Why would a government want to use expansionary fiscal policy to help

Question

QUESTION 5 Why would a government want to use expansionary fiscal policy to help stimulate aggregate demand if, in the long run, we would expect prices to adjust and the economy to return to its long-run equilibrium on its own? A. Expansionary fiscal policy always works in stimulating aggregate demand. B. It could take a long time for prices to adjust by market forces alone. C. Expansionary fiscal policy has no adverse effects on the economy. D. When prices adjust during a recession, we see increases in inflation. E. Expansionary fiscal policy is easy to get approved by Congress and the president. QUESTION 6 If your marginal propensity to consume is 0.75 and you get an additional S400 in income, you would spend $__on consumption. If your income increases by $1,500 and you only consume $900 of it, your marginal propensity to consume would be equal to QUESTION 7 When calculating the stock of money in the economy, checking deposits (are / are not) included, checks in the checkbook (are / are not] included, credit cards (are / are not) included. QUESTION 8- complete the following sentences by selecting one of the options in the square brackets What function of money is highlighted when Sally pays her cell phone bill with cash? _L[ fiat money / medium of exchange / store of value / unit of account / commodity money) When a fisherman records the value of a day's catch in terms of dollars, dollars serve as fiat money / medium of exchange / store of value / unit of account / commodity money) What function of money is highlighted if someone puts cash under his or her mattress to have on hand for unexpected emergencies? fiat money / medium of exchange / store of value ! unit of account / commodity money]

Explanation / Answer

Q5. The correct answer is B. The adjustment is sluggish that is why an expansionary fiscal policy helps in coming out of teh recession immediately by incraesingaggregare demadn at first hand.

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