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1
If counter-cyclical fiscal policy causes crowding-out, which of the following statements is correct?
A)Crowding-out increases the effectiveness of fiscal policy by pushing up interest rates and reducing investment spending.
B)Crowding-out reduces the effectiveness of fiscal policy by pushing up interest rates and reducing investment spending.
C)Crowding-out reduces the effectiveness of fiscal policy by lowering interest rates and reducing investment spending.
D)Crowding-out enhances the effectiveness of fiscal policy by lowering interest rates and increasing investment spending.
E)Crowding-out reduces money demand and thereby reduces the effectiveness of fiscal policy.
2
Why would Canadian monetary policy be ineffective if we fixed the value of our dollar to that of the U.S. dollar?
A)Expanding the money supply in Canada would crowd out investment spending.
B)Contracting the money supply in Canada would crowd out investment spending.
C)Expanding the money supply in Canada would cause a rise in interests rates and an outflow of Canadian dollars and thereby frustrate the money expansion.
D)Expanding the money supply in Canada would cause a fall in interests rates and an outflow of Canadian dollars and thereby frustrate the money expansion.
3
All of the following statements about deflation, except one, are true. Which is the exception?
A)It is characterized by interest rates at zero or near zero.
B)Apart from one year, it has not occurred in Canada since the Great Depression.
C)It means that a return on idle money is possible.
D)It encourages consumers to postpone major purchases.
E)It encourages large-scale investment in the economy.





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