Refer to Figure 29-1. The French fall in love with California ...

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Refer to Figure 29-1. The French fall in love with California wines and triple their purchases of this beverage. Assuming all else remains constant, this would be represented as a movement from
 
  A) A to D. B) A to B. C) B to A. D) B to C. E) C to D.

Question 2

How does expansionary monetary policy increase spending in the economy compared to how expansionary fiscal policy increases spending in the economy?
 
  What will be an ideal response?

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Answer to Question 1

B

Answer to Question 2

Expansionary monetary policy increases spending by decreasing interest rates which induces households and firms to increase spending on consumer durables and plant and equipment. Expansionary fiscal policy increases spending by directly increasing government spending or by cutting taxes to increase household disposable income which increases consumption spending.