Multiple choice problems about Ricardo-Barro effect, Bond Prices and Demand for money.
1. A discretionary fiscal policy is a fiscal policy that:
a) involves a change in government defense spending.
b) is triggered by the state of the economy.
c) requires action by the Congress.
d) involves a change in corporate tax rates.
2. In the absence of a Ricardo-Barro effect, a fiscal policy that decreases government saving ________ the supply of loanable funds, ________ the real interest rate, and ________ investment.
a) increases; decreases; crowds out
b) increases; decreases; increases
c) decreases; increases; increases
d) decreases; increases; crowds out
3. In the short-run, among which of the following actions increase the interest rate?
a) A decrease in the demand for money
b) An increase in bond prices
c) An increase in the quantity of money
d) An increase in the demand for money