Question

1) The Congress passed the Coronavirus Aid, Relief, and Economic Security Act,a.k.a the CARES Act.  It is a: Select one:

a. Contractionary fiscal policy

b. Expansionary fiscal policy

c. Contractionary monetary policy

d. Expansionary monetary policy

2) In March 2020, the FED lowered the Federal Funds Rate, the benchmark interest rate, from 1.5% to 0.05%. This is:

Select one:

a. Expansionary fiscal policy

b. Expansionary monetary policy

c. Contractionary fiscal policy

d. Contractionary monetary policy

3) Which of the following best describes the effect of the multi-trillion-dollar relief act recently passed by congress?

Select one:

a. The Aggregate Supply curve shifts to the left.

b. The Aggregate Supply curve shifts to the right.

c. Equilibrium shifts to the left along the Aggregate Supply curve.

d. Equilibrium shifts to the right along the Aggregate Supply curve.

Answer 1

1 - Option B

Expansionary fiscal policy

The stimulus package is given by the governent . Hence it will be expansionary fiscal policy

2 - Option B

Expansionary monetary policy

Since the interest rates are lowered , borrowing will be cheaper , the policy is run by central bank. Thus it will be expansionary monetary policy.

3 - Option D

Equlibrium shifts to right along the aggregate supply curve

This package will give the stimulus to business as well as individuals. Hence both AD and AS will be boosted. Thus the equilibrium will shift right.