Which of the following describes a part of the transmission mechanism?
A) a change in real money balances causes a portfolio disequilibrium and asset holders' reactions influence interest rates
B) an income tax rate cut stimulates private spending but the resulting interest rate increase dampens the income expansion
C) an increase in government spending is partially offset by the crowding out of private investment
D) the central bank undertakes open market purchases and the resulting interest rate increase encourages people to save more
E) both B and C
Correct Answer:
Verified
Q29: Crowding out
A)does not occur in the liquidity
Q30: A policy mix designed to promote increased
Q31: Assume the government cuts the level of
Q32: In a normal IS-LM framework, crowding out
Q33: Assume you would like to stimulate investment
Q35: Assume we combine restrictive monetary policy with
Q36: When conducting monetary policy, a central bank
Q37: Assume the government wants to increase the
Q38: During the recession of 2007-09, the U.S.Fed
A)lowered
Q39: Given a normal IS-LM model, which of
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