Which of the following statements are correct (assuming a closed economy)? 1. The higher the marginal propensity to consume, the lower will be investment multiplier. 2. A reduction of the tax rate lowers the fiscal policy multiplier. 3. The higher the marginal propensity to consume, the more consumption can be induced by more government spending, and this will lead to a higher fiscal policy multiplier. 4. When fiscal policy is not able to compensate fully for other demand reductions, an expansionary monetary policy can be helpful to overcome a recession more quickly. 5. An expansionary monetary policy by the ECB in combination with a fiscal expansion will always lead to inflation. 6. Only a consequent fiscal consolidation will help the economy out of a recession. 7. In the liquidity trap there is no crowding-out effect to be expected. 8. It is best to conduct fiscal consolidation when the economy is in a boom.
The program has provoked a lot of political discussions. Which of the following statements
are correct (assuming a closed economy)?
1. The higher the marginal propensity to consume, the lower will be investment multiplier.
2. A reduction of the tax rate lowers the fiscal policy multiplier.
3. The higher the marginal propensity to consume, the more consumption can be induced by
more government spending, and this will lead to a higher fiscal policy multiplier.
4. When fiscal policy is not able to compensate fully for other
expansionary
5. An expansionary monetary policy by the ECB in combination with a fiscal expansion will
always lead to inflation.
6. Only a consequent fiscal consolidation will help the economy out of a recession.
7. In the liquidity trap there is no crowding-out effect to be expected.
8. It is best to conduct fiscal consolidation when the economy is in a boom.
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