« previous next »

Author Question: Suppose a cut in government spending occurs that is at least partially unexpected. Explain what ... (Read 71 times)

jrubin

  • Hero Member
  • *****
  • Posts: 552
on: Jun 30, 2018
Suppose a cut in government spending occurs that is at least partially unexpected. Explain what effect this will have on stock prices.
 
  What will be an ideal response?

Question 2

A fiscal contraction will tend to cause which of the following to occur?
 
  A) a reduction in the interest rate and a reduction in investment
  B) a reduction in the interest rate and an upward shift in the LM curve
  C) a reduction in the interest rate and an ambiguous effect on investment
  D) no change in output if the Fed simultaneously pursues contractionary monetary policy


CharlieArnold

  • Sr. Member
  • ****
  • Posts: 319
Reply #1 on: Jun 30, 2018
Answer to Question 1

Output falls and interest rates fall. Here, the effects are ambiguous. The drop in the interest rate will raise stock prices while the drop in Y will lower them.

Answer to Question 2

C


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
« previous next »
 

Did you know?

Less than one of every three adults with high LDL cholesterol has the condition under control. Only 48.1% with the condition are being treated for it.

Did you know?

Adolescents often feel clumsy during puberty because during this time of development, their hands and feet grow faster than their arms and legs do. The body is therefore out of proportion. One out of five adolescents actually experiences growing pains during this period.

Did you know?

Fungal nail infections account for up to 30% of all skin infections. They affect 5% of the general population—mostly people over the age of 70.

Did you know?

Amoebae are the simplest type of protozoans, and are characterized by a feeding and dividing trophozoite stage that moves by temporary extensions called pseudopodia or false feet.

Did you know?

There are immediate benefits of chiropractic adjustments that are visible via magnetic resonance imaging (MRI). It shows that spinal manipulation therapy is effective in decreasing pain and increasing the gaps between the vertebrae, reducing pressure that leads to pain.

Tropical savanna and grazers in Kenya. The tropical savanna landscape is partially maintained by per Tropical savanna and grazers in Kenya. The tropical savanna landscape is partially maintained by per
Much time and effort occurs between the development of a research idea and the statistical analysis Much time and effort occurs between the development of a research idea and the statistical analysis
The world attempted to deal with Somalia as if it were a real country but painfully learned that Som The world attempted to deal with Somalia as if it were a real country but painfully learned that Som
Diesel combustion occurs when fuel is injected into the hot, highly compressed air in the cylinder. Diesel combustion occurs when fuel is injected into the hot, highly compressed air in the cylinder.
Mechanisms to Explain the Effects of Massage Mechanisms to Explain the Effects of Massage
Suppose a country imports televisions. The country's supply and demand curves are shown in ... Suppose a country imports televisions. The country's supply and demand curves are shown in ...
Video: Parathyroid hormone (bone resorption) & Calcitonin (bone deposition)

For a complete list of videos, visit our video library