In a closed economy, in the short-run fiscal is more effective at decreasing unemployment, when: none of the the other options is correct. government spending is cut by more O the central bank is targeting output O either the marginal propensity to consume is smaller and/or the real interest rate sensitivity of investment is smaller O the central bank is targeting the real interest rate O either the marginal propensity to consume is smaller and/or the real interest rate sensitivity of investment is larger autonomous consumption is larger O larger tax increases are used autonomous investment is larger
In a closed economy, in the short-run fiscal is more effective at decreasing unemployment, when: none of the the other options is correct. government spending is cut by more O the central bank is targeting output O either the marginal propensity to consume is smaller and/or the real interest rate sensitivity of investment is smaller O the central bank is targeting the real interest rate O either the marginal propensity to consume is smaller and/or the real interest rate sensitivity of investment is larger autonomous consumption is larger O larger tax increases are used autonomous investment is larger
Chapter11: Managing Aggregate Demand: Fiscal Policy
Section: Chapter Questions
Problem 2TY
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