As discussed in the Case in Point on the size of the fiscal multiplier, a study conducted by Jonathan Parker on the effect of fiscal policy during recessions suggests that
A) the multiplier effect of fiscal policy is much less than that for monetary policy.
B) temporary fiscal policy financed through government borrowing implies a multiplier value between 0.8 and 1.5.
C) fiscal policy has little effect on the economy and that the multiplier value is effectively zero.
D) statistical models are inadequate to determine the multiplier and the multiplier value likely varies based on the state of the economy.
Ans: D) statistical models are inadequate to determine the multiplier and the multiplier value likely varies based on the state of the economy.
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The sales tax
A) is not consistent with the benefits-received principle because low-income individuals spend less on goods and services than do high-income individuals, yet pay the same sales tax rate. B) is consistent with the benefits-received principle because low-income individuals spend less on goods and services than do high-income people. C) is not consistent with the ability-to-pay principle because low-income individuals tend to spend a larger fraction of their income than do high-income individuals. D) is not consistent with the ability-to-pay principle because low-income individuals tend to purchase a smaller bundle of goods and services compared to high-income individuals.
Explain why when Norway unilaterally fixes its exchange rate against the euro but leaves the krone free to float against the non-euro currencies, it is unable to keep at least some monetary independence
What will be an ideal response?