Suppose policy makers implement a fiscal expansion that is not ...

[lunatika]

Suppose policy makers implement a fiscal expansion that is not fully anticipated by financial market participants. We know that this will
 
  A) always cause stock prices to fall.
  B) always cause stock prices to rise.
  C) tend to cause stock prices to rise if the LM curve is very flat.
  D) tend to cause stock prices to rise if the LM curve is vertical.

Question 2

When a liquidity trap situation exists, the most appropriate policy to increase output would be
 
  A) a central bank sale of bonds.
  B) an increase in government spending.
  C) a central bank purchase of bonds.
  D) none of the above

[wilsonbho]

Answer to Question 1

C

Answer to Question 2

B

[lunatika]

Thank you

[wilsonbho]

No problemo