Fiscal Policy


Contractionary fiscal policy is so named because it:​

​necessarily reduces the size of government

​is aimed at reducing aggregate demand and thus achieving price stability

​involves a contraction of the nation’s money supply

​is expressly designed to expand real GDP


If the prices of all goods and services rose, but the quantity produced remained unchanged, what would happen to nominal and real GDP?​

​Real GDP would rise, but nominal GDP would be unchanged

​Nominal and real GDP would both be unchanged

​Nominal GDP would rise, but real GDP would be unchanged

​Nominal and real GDP would both rise


Which of the following will generate a demand for country X’s currency in the foreign exchange market?​

​Charitable contributions by country X’s citizens to citizens of developing nations

​The imports of country X

​The desire of foreigners to buy stocks and bonds of firms in country X

​Travel by citizens of country X in other countries

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