Expansionary fiscal policy

Reference no: EM1311440

1. Suppose government spending increases in a closed economy. Would the effect on aggregate demand be larger if the Bank of Canada took no action in response, or if the Bank were committed to maintaining a fixed interest rate? Explain

2. In which of the following circumstances is expansionary fiscal policy more likely to lead to a short-run increase in investment? Explain?

When investment accelerator is large, or when it is small?
When the interest sensitivity of investment is large, or when it is small?

when the marginal propensity to import is small, or when it is large?

Reference no: EM1311440

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