First, briefly explain what is meant by the policy mix. Second, explain what effect different policy mixes might have on the level of output, investment, and the interest rate.
What will be an ideal response?
Answer: The policy mix refers to the possible combinations of monetary (exp. or contr.) and fiscal (exp. or contr.) that can be simultaneously implemented. There are a number of different answers that could be given to the latter part of the question. The effects on output, the interest rate, and investment will depend on the type of mix.
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When U.S. net exports fall, which decreases the aggregate quantity of goods and services demanded, the dollar must have
a) depreciated b) reciprocated. c) appreciated. d) equivocated.
Inflation results
(a) when the price of one good or service increases. (b) when too much money is chasing too few goods. (c) when prices, on average, decrease across the economy. (d) when banks decrease lending.