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