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

"Monetary policy can be described either in terms of the money supply or in terms of the interest rate." This statement amounts to the assertion that

The theory of liquidity preference is largely at odds with the basic ideas of supply and demand.

According to the theory of liquidity preference,which variable adjusts to balance the supply and demand for money?

In a certain economy,when income is $400,consumer spending is $350.The value of the multiplier for this economy is 3.125.It follows that,when income is $450,consumer spending is

Changes in the interest rate

The interest rate that the Federal Reserve pays banks on the reserves they hold is called the

If the MPC is 3/4 then the multiplier is

Use the money market to explain the interest-rate effect and its relation to the slope of the aggregate demand curve.

The Federal Funds rate is the interest rate

The wealth effect stems from the idea that a higher price level

The idea that expansionary fiscal policy has a positive affect on investment is known as

The Kennedy tax cut of 1964 was

A 2009 article in The Economist noted that

Supply-side economists believe that a reduction in the tax rate

In response to the sharp decline in stock prices in October 1987,the Federal Reserve

According to liquidity preference theory,

When the Federal Reserve conducts an open-market purchase,the money supply _____ and aggregate demand _____.

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.Under the assumptions of the model,

Which among the following assets is the most liquid?

An increase in the money supply shifts the aggregate-supply curve to the right.