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Author Question: Suppose an increase in government spending occurs that is at least partially unexpected. Explain ... (Read 74 times)

waynest

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on: Jun 30, 2018
Suppose an increase 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

Assume that investment does not depend on the interest rate. A reduction in the money supply will cause which of the following for this economy?
 
  A) no change in the interest rate
  B) no change in output
  C) a reduction in investment
  D) an increase in investment


234sdffa

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Reply #1 on: Jun 30, 2018
Answer to Question 1

Output rises and interest rates rise. Here, the effects are ambiguous. The rise in the interest rate will reduce stock prices while the increase in Y will increase them.

Answer to Question 2

B


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