Contractionary fiscal policy would be most effective in decreasing inflation when
A. the marginal propensity to consume is low.
B. investment spending is insensitive to interest rates.
C. the economy has a high marginal tax rate.
D. investment spending is sensitive to interest rates.
Answer: B
You might also like to view...
When the U.S. government launched a massive rescue plan in response to the 2008-2009 financial crisis, the overall demand for loanable funds ________ because the ________
A) decreased; demand by households, businesses, and financial institutions changed by the same amount as the federal government demand B) did not change; demand by households, businesses, and financial institutions changed by the same amount as the federal government demand C) increased; demand by households, businesses, and financial institutions increased as did the federal government demand D) decreased; demand by households, businesses, and financial institutions decreased by more than the federal government demand increased E) increased; demand by households, businesses, and financial institutions increased by more than the federal government demand increased
Refer to the Article Summary. Assume that more foreign governments and hospitals begin to offer and publicize their medical services to American medical tourists and, due to the growing number of aging baby boomers, more Americans desire hip-
replacement surgery. All else equal, what will happen in the market for hip-replacement surgery as a result of these two factors? A) Demand will increase, but these two factors will not shift the supply curve. B) Demand and supply will both increase. C) Demand will increase and supply will decrease. D) Supply will increase, but these two factors will not shift the demand curve.