Suppose that the United Kingdom pegs the pound to the euro and the European Central Bank decides to use monetary policy to offset the possible inflationary effects of European expansionary fiscal policy. How would the European Central Bank's monetary policy affect European interest rates?
A) They would rise.
B) They would fall.
C) The combination of the expansionary fiscal policy and the monetary policy would cause interest rates to return to their level prior to the expansionary fiscal policy.
D) The combination of the expansionary fiscal policy and the monetary policy would not affect interest rates.
Ans: A) They would rise.
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Refer to the scenario above. If Sarah is optimizing in differences, then which of the following statements is true?
A) An optimizer will rent the hotel room for three days if the net benefit of staying for three days exceeds the net benefit of staying for two days. B) An optimizer will rent the hotel room for three days if the cost of staying for the first two days is less than the cost of staying for the third day. C) An optimizer will rent the hotel room for three days if the benefit of staying for the third day exceeds the benefits of staying for the first two days. D) An optimizer will rent the hotel room for three days if the benefit of staying for the third day exceeds the cost of staying for the third day.
If government purchases are $400 million, taxes are $700 million, and transfers are $200 million, which of the following is true?
A) Public saving is $100 million. B) The budget deficit is $100 million. C) The budget deficit is $500 million. D) Public saving is $500 million.