QUESTION 4: PLACE TRUE OR FALSE OR UNCERTAIN (T/F/U)According to the classical macroeconomic model, expansionary fiscal policy has an inflationary effect.Assuming that you have free capital mobility and fixed exchange rate policy, then fiscal policy has a positive effect on outputExpansionary fiscal policy always has a depreciating effect on the domestic exchange rate.According to the relative income hypothesis, the savings rate is a non-linear function of the ratio of current to previous peak income.In the IS-LM-BOP model, macroeconomic adjustments occur through changes in money supply if the country adopts a fixed exchange rate regime.According to the impossible trinity, a country that has a liberalized capital account and independent monetary policy will also achieve a stable exchange rate.

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Answered: According to the classical…

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Chapter1: Making Economics Decisions

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QUESTION 4:

PLACE TRUE OR FALSE OR UNCERTAIN (T/F/U)

According to the classical macroeconomic model, expansionary fiscal policy has an inflationary effect.
Assuming that you have free capital mobility and fixed exchange rate policy, then fiscal policy has a positive effect on output
Expansionary fiscal policy always has a depreciating effect on the domestic exchange rate.
According to the relative income hypothesis, the savings rate is a non-linear function of the ratio of current to previous peak income.
In the IS-LM-BOP model, macroeconomic adjustments occur through changes in money supply if the country adopts a fixed exchange rate regime.
According to the impossible trinity, a country that has a liberalized capital account and independent monetary policy will also achieve a stable exchange rate.

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