Author Question: Suppose policy makers implement an unexpected fiscal expansion. Further assume that monetary policy ... (Read 95 times)

WWatsford · **on:** Jun 30, 2018

Suppose policy makers implement an unexpected fiscal expansion. Further assume that monetary policy is expected to keep interest rates constant in response to this unexpected fiscal expansion. Given this information, we would expect that

A) stock prices will rise.
B) stock prices will remain constant.
C) this policy will have an ambiguous effect on stock prices.
D) the effect on stock prices will depend on the slope of the IS curve.

Question 2

The IS curve represents

A) the single level of output where the goods market is in equilibrium.
B) the single level of output where financial markets are in equilibrium.
C) the combinations of output and the interest rate where the money market is in equilibrium.
D) the combinations of output and the interest rate where the goods market is in equilibrium.
E) none of the above