The government decides to use Monetary policy to contract the economy which of t

Question

The government decides to use Monetary policy to contract the economy which of the below would be a concern

A. crowding out

B. liquidity trap

C. Inflation

D. stagflation

The theory of sticky wages to explain why the short run aggregate supply curve is upward sloping states that prices are 'sticky'

A. that as government increases spending this will drive up the interest rate which will lead to a decrease in investment

B. temporarily

C. forever and therefore the long run aggregate supply curve should be upward sloping

D. until aggregate demand shifts to the right

An increase in the budget deficit raises investment because the interest rate rises.

True

False

Explanation / Answer

An increase in budget deficit increases the interest rates which reduces the private investment. Answer is False.

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