Exam 34: The Influence of Monetary and Fiscal Policy on Aggregate Demand

The wealth-effect notes that a _____ price level increases the real value of households' wealth.The larger real wealth _____ the quantity of goods and services demanded.

Explain why the interest rate is the opportunity cost of holding currency.What is the benefit of holding currency?

Other things the same,which of the following responses would we expect from an increase in U.S.interest rates?

If the MPC is 4/5,the multiplier is 5/4.

In which of the following cases would the quantity of money demanded be smallest?

Which of the following events would shift money demand to the left?

A fiscal stimulus was initiated by President Obama in response to the economic downturn of 2008-2009.At that time,the president's economists estimated the multiplier to be

Supply-side economists believe that changes in government purchases affect

Open-market purchases

If expected inflation is constant,then when the nominal interest rate falls,the real interest rate

According to liquidity preference theory,an increase in the price level shifts the

When the Fed sells government bonds,the reserves of the banking system

Figure 21-3. -Refer to Figure 21-3.For an economy such as the United States,what component of the demand for goods and services is most responsible for the decrease in output from Y₁ to Y₂?

When there is an increase in government expenditures,which of the following raises investment spending?

According to the theory of liquidity preference,if the interest rate rises

In a certain economy,when income is $200,consumer spending is $145.The value of the multiplier for this economy is 6.25.It follows that,when income is $230,consumer spending is

According to the Theory of Liquidity Preference,a fall in the _____ reduces the amount of money that people wish to hold.As a result,falling interest rates stimulates investment spending and aggregate _____.

Critics of stabilization policy argue that

Figure 21-2.On the left-hand graph,MS represents the supply of money and MD represents the demand for money;on the right-hand graph,AD represents aggregate demand.The usual quantities are measured along the axes of both graphs. -Refer to Figure 21-2.Assume the money market is always in equilibrium,and suppose r₁ = 0.08;r₂ = 0.12;Y₁ = 13,000;Y₂ = 10,000;P₁ = 1.0;and P₂ = 1.2.Which of the following statements is correct? When P = P₂,

There are three factors that help explain the slope of the aggregate demand curve.Which two are less important? Why are they less important?