Question

1. The tax multiplier is always more effective in stimulating the economy than government multiplier because tax cut give people more incentive to spend.

   True

   False

2. The “impossible trinity” refers to the idea that it is impossible for a country to simultaneously have free capital flows, a fixed exchange rate, and low unemployment.

   True

   False

Answer 1

1) False

The tax multiplier is stated as -mpc/mps whereas the government expenditure multiplier is stated as the 1/mps . where mpc refersto marginal propensity to consume and mps refers to marginal propensity to save. The tax multiplier is one less than government multiplier so that the above statement is False.

2) False

Impossible Trinity refers to the trade off government has to face while deciding on the international monetary policy. It is impossible for a country to have a following there objectives at a time

1) free capital flows 2) fixed exchange rate 3) independent ( autonomous) monetary policy

Any country has to choose any two between these three objectives.

So that it's not an low unemployment it's an independent monetary policy