Question 1

Other things the same,as the price level rises,

Accepted Answer

A)  the interest rate rises causing aggregate demand to shift. 
B)  the interest rate rises causing a movement along a given aggregate-demand curve. 
C)  the interest rate falls causing aggregate demand to shift. 
D)  the interest rate falls causing a movement along a given aggregate-demand curve. 
A)  the interest rate rises causing aggregate demand to shift. 
B)  the interest rate rises causing a movement along a given aggregate-demand curve. 
C)  the interest rate falls causing aggregate demand to shift. 
D)  the interest rate falls causing a movement along a given aggregate-demand curve.

Question 2

In 1961,President John F.Kennedy,acting upon advice from his economists,proposed tax cuts.The advice he received

Accepted Answer

A)  was opposed to the teaching of Keynes,who had taught that tax cuts were counterproductive. 
B)  was opposed to the teaching of Keynes,who had taught that all attempts to stabilize the economy were futile. 
C)  came from economists who had studied Keynes's ideas when those ideas were only a few years old. 
D)  came from economists who were unaware of Keynes's ideas because those ideas had not yet been widely disseminated at that time. 
A)  was opposed to the teaching of Keynes,who had taught that tax cuts were counterproductive. 
B)  was opposed to the teaching of Keynes,who had taught that all attempts to stabilize the economy were futile. 
C)  came from economists who had studied Keynes's ideas when those ideas were only a few years old. 
D)  came from economists who were unaware of Keynes's ideas because those ideas had not yet been widely disseminated at that time.

Question 3

A surplus or shortage in the money market is eliminated by adjustments in the price level according to

Accepted Answer

A)  both liquidity preference theory and classical theory. 
B)  neither liquidity preference theory nor classical theory. 
C)  liquidity preference theory,but not classical theory. 
D)  classical theory,but not liquidity preference theory. 
A)  both liquidity preference theory and classical theory. 
B)  neither liquidity preference theory nor classical theory. 
C)  liquidity preference theory,but not classical theory. 
D)  classical theory,but not liquidity preference theory.

Question 4

If the government cuts the tax rate,workers get to keep

Accepted Answer

A)  less of each additional dollar they earn,so work effort increases,and aggregate supply shifts right. 
B)  less of each additional dollar they earn,so work effort decreases,and aggregate supply shifts left. 
C)  more of each additional dollar they earn,so work effort increases,and aggregate supply shifts right. 
D)  more of each additional dollar they earn,so work effort decreases,and aggregate supply shifts left. 
A)  less of each additional dollar they earn,so work effort increases,and aggregate supply shifts right. 
B)  less of each additional dollar they earn,so work effort decreases,and aggregate supply shifts left. 
C)  more of each additional dollar they earn,so work effort increases,and aggregate supply shifts right. 
D)  more of each additional dollar they earn,so work effort decreases,and aggregate supply shifts left.

Question 5

The interest rate would fall and the quantity of money demanded would

Accepted Answer

A)  increase if there were a surplus in the money market. 
B)  increase if there were a shortage in the money market. 
C)  decrease if there were a surplus in the money market. 
D)  decrease if there were a shortage in the money market. 
A)  increase if there were a surplus in the money market. 
B)  increase if there were a shortage in the money market. 
C)  decrease if there were a surplus in the money market. 
D)  decrease if there were a shortage in the money market.

Question 6

If the multiplier is 6.25,then the MPC is

Accepted Answer

A)  0.2. 
B)  0.6. 
C)  0.75. 
D)  0.84. 
A)  0.2. 
B)  0.6. 
C)  0.75. 
D)  0.84.

Question 7

The potential positive feedback that government spending may have on investment is know as the _____.The potential negative effect that government spending may have on investment is know as the _____ effect.

Accepted Answer

investment

Question 8

People will want to hold less money if the price level

Accepted Answer

A)  increases or if the interest rate increases. 
B)  decreases or if the interest rate decreases. 
C)  increases or if the interest rate decreases. 
D)  decreases or if the interest rate increases. 
A)  increases or if the interest rate increases. 
B)  decreases or if the interest rate decreases. 
C)  increases or if the interest rate decreases. 
D)  decreases or if the interest rate increases.

Question 9

If the Federal Reserve's goal is to stabilize aggregate demand,then it will _____ the money supply in response to a stock market boom.This causes interest rates to _____.

Accepted Answer

The answer of If the Federal Reserve's goal is to...

Question 10

According to the theory of liquidity preference,

Accepted Answer

A)  if the interest rate is below the equilibrium level,then the quantity of money people want to hold is less than the quantity of money the Fed has created. 
B)  if the interest rate is above the equilibrium level,then the quantity of money people want to hold is greater than the quantity of money the Fed has created. 
C)  the demand for money is represented by a downward-sloping line on a supply-and-demand graph. 
D)  All of the above are correct. 
A)  if the interest rate is below the equilibrium level,then the quantity of money people want to hold is less than the quantity of money the Fed has created. 
B)  if the interest rate is above the equilibrium level,then the quantity of money people want to hold is greater than the quantity of money the Fed has created. 
C)  the demand for money is represented by a downward-sloping line on a supply-and-demand graph. 
D)  All of the above are correct.

Question 11

If the Fed conducts open-market sales,which of the following quantities increase(s)?

Accepted Answer

A)  interest rates,prices,and investment spending 
B)  interest rates and prices,but not investment spending 
C)  interest rates and investment,but not prices 
D)  interest rates,but not investment or prices 
A)  interest rates,prices,and investment spending 
B)  interest rates and prices,but not investment spending 
C)  interest rates and investment,but not prices 
D)  interest rates,but not investment or prices

Question 12

Suppose foreigners find U.S.goods and services more desirable for some reason other than a change in the exchange rate.Which policies could be used to offset the resulting change in output?

Accepted Answer

A)  an increase in the money supply and an increase in taxes 
B)  an increase in the money supply and a decrease in taxes 
C)  a decrease in the money supply and an increase in taxes 
D)  a decrease in the money supply and a decrease in taxes 
A)  an increase in the money supply and an increase in taxes 
B)  an increase in the money supply and a decrease in taxes 
C)  a decrease in the money supply and an increase in taxes 
D)  a decrease in the money supply and a decrease in taxes

Question 13

The crowding-out effect occurs because an increase in government spending _____ interest rates,causing _____ to fall.

Accepted Answer

increases,

Question 14

Which of the following statements is correct for the short run?

Accepted Answer

A)  Output is determined by the amount of capital,labor,and technology;the interest rate adjusts to balance the supply and demand for money;the price level adjusts to balance the supply and demand for loanable funds. 
B)  Output is determined by the amount of capital,labor,and technology;the interest rate adjusts to balance the supply and demand for loanable funds;the price level adjusts to balance the supply and demand for money. 
C)  Output responds to the aggregate demand for goods and services;the interest rate adjusts to balance the supply and demand for money;the price level is relatively slow to adjust. 
D)  Output responds to the aggregate demand for goods and services;the interest rate adjusts to balance the supply and demand for loanable funds;the price level adjusts to balance the supply and demand for money. 
A)  Output is determined by the amount of capital,labor,and technology;the interest rate adjusts to balance the supply and demand for money;the price level adjusts to balance the supply and demand for loanable funds. 
B)  Output is determined by the amount of capital,labor,and technology;the interest rate adjusts to balance the supply and demand for loanable funds;the price level adjusts to balance the supply and demand for money. 
C)  Output responds to the aggregate demand for goods and services;the interest rate adjusts to balance the supply and demand for money;the price level is relatively slow to adjust. 
D)  Output responds to the aggregate demand for goods and services;the interest rate adjusts to balance the supply and demand for loanable funds;the price level adjusts to balance the supply and demand for money.

Question 15

Which of the following effects results from the change in the interest rate created by an increase in government spending?

Accepted Answer

A)  the investment accelerator and crowding out 
B)  the investment accelerator but not crowding out 
C)  crowding out but not the investment accelerator 
D)  neither crowding out nor the investment accelerator 
A)  the investment accelerator and crowding out 
B)  the investment accelerator but not crowding out 
C)  crowding out but not the investment accelerator 
D)  neither crowding out nor the investment accelerator

Question 16

According to classical macroeconomic theory,

Accepted Answer

A)  the price level is sticky in the short run and it plays only a minor role in the short-run adjustment process. 
B)  for any given level of output,the interest rate adjusts to balance the supply of,and demand for,money. 
C)  output is determined by the supplies of capital and labor and the available production technology. 
D)  All of the above are correct. 
A)  the price level is sticky in the short run and it plays only a minor role in the short-run adjustment process. 
B)  for any given level of output,the interest rate adjusts to balance the supply of,and demand for,money. 
C)  output is determined by the supplies of capital and labor and the available production technology. 
D)  All of the above are correct.

Question 17

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.A decrease in Y from Y1 to Y2 is explained as follows:

Accepted Answer

A)  The Federal Reserve increases the money supply,causing the money-demand curve to shift from MD1 to MD2;this shift of MD causes r to increase from r1 to r2;and this increase in r causes Y to decrease from Y1 to Y2. 
B)  An increase in P from P1 to P2 causes the money-demand curve to shift from MD1 to MD2;this shift of MD causes r to increase from r1 to r2;and this increase in r causes Y to decrease from Y1 to Y2. 
C)  A decrease in P from P2 to P1 causes the money-demand curve to shift from MD1 to MD2;this shift of MD causes r to increase from r1 to r2;and this increase in r causes Y to decrease from Y1 to Y2. 
D)  An increase in the price level causes the money-demand curve to shift from MD2 to MD1;this shift of MD causes r to decrease from r2 to r1;and this decrease in r causes Y to decrease from Y1 to Y2. 
A)  The Federal Reserve increases the money supply,causing the money-demand curve to shift from MD1 to MD2;this shift of MD causes r to increase from r1 to r2;and this increase in r causes Y to decrease from Y1 to Y2. 
B)  An increase in P from P1 to P2 causes the money-demand curve to shift from MD1 to MD2;this shift of MD causes r to increase from r1 to r2;and this increase in r causes Y to decrease from Y1 to Y2. 
C)  A decrease in P from P2 to P1 causes the money-demand curve to shift from MD1 to MD2;this shift of MD causes r to increase from r1 to r2;and this increase in r causes Y to decrease from Y1 to Y2. 
D)  An increase in the price level causes the money-demand curve to shift from MD2 to MD1;this shift of MD causes r to decrease from r2 to r1;and this decrease in r causes Y to decrease from Y1 to Y2.

Question 18

If the marginal propensity to consume is 5/6,and there is no investment accelerator or crowding out,a $20 billion increase in government expenditures would shift the aggregate demand curve right by

Accepted Answer

A)  $60 billion,but the effect would be larger if there were an investment accelerator. 
B)  $60 billion,but the effect would be smaller if there were an investment accelerator. 
C)  $120 billion,but the effect would be larger if there were an investment accelerator. 
D)  $120 billion,but the effect would be smaller if there were an investment accelerator. 
A)  $60 billion,but the effect would be larger if there were an investment accelerator. 
B)  $60 billion,but the effect would be smaller if there were an investment accelerator. 
C)  $120 billion,but the effect would be larger if there were an investment accelerator. 
D)  $120 billion,but the effect would be smaller if there were an investment accelerator.

Question 19

Which among the following assets is the most liquid?

Accepted Answer

A)  capital goods 
B)  stocks and bonds with a low risk 
C)  real estate 
D)  funds in a checking account 
A)  capital goods 
B)  stocks and bonds with a low risk 
C)  real estate 
D)  funds in a checking account

Question 20

In the long run,fiscal policy influences

Accepted Answer

A)  saving,investment,and growth;in the short run,fiscal policy primarily influences technology and the production function. 
B)  saving,investment,and growth;in the short run,fiscal policy primarily influences the aggregate demand for goods and services. 
C)  technology and the production function;in the short run,fiscal policy primarily influences saving,investment,and growth. 
D)  the aggregate demand for goods and services;in the short run,fiscal policy primarily influences technology and the production function. 
A)  saving,investment,and growth;in the short run,fiscal policy primarily influences technology and the production function. 
B)  saving,investment,and growth;in the short run,fiscal policy primarily influences the aggregate demand for goods and services. 
C)  technology and the production function;in the short run,fiscal policy primarily influences saving,investment,and growth. 
D)  the aggregate demand for goods and services;in the short run,fiscal policy primarily influences technology and the production function.

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

Other things the same,as the price level rises,

In 1961,President John F.Kennedy,acting upon advice from his economists,proposed tax cuts.The advice he received

A surplus or shortage in the money market is eliminated by adjustments in the price level according to

If the government cuts the tax rate,workers get to keep

The interest rate would fall and the quantity of money demanded would

If the multiplier is 6.25,then the MPC is

The potential positive feedback that government spending may have on investment is know as the _____.The potential negative effect that government spending may have on investment is know as the _____ effect.

People will want to hold less money if the price level

If the Federal Reserve's goal is to stabilize aggregate demand,then it will _____ the money supply in response to a stock market boom.This causes interest rates to _____.

According to the theory of liquidity preference,

If the Fed conducts open-market sales,which of the following quantities increase(s)?

Suppose foreigners find U.S.goods and services more desirable for some reason other than a change in the exchange rate.Which policies could be used to offset the resulting change in output?

The crowding-out effect occurs because an increase in government spending _____ interest rates,causing _____ to fall.

Which of the following statements is correct for the short run?

Which of the following effects results from the change in the interest rate created by an increase in government spending?

According to classical macroeconomic theory,

If the marginal propensity to consume is 5/6,and there is no investment accelerator or crowding out,a $20 billion increase in government expenditures would shift the aggregate demand curve right by

Which among the following assets is the most liquid?

In the long run,fiscal policy influences

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply,demand,and Government Policies

Consumers,producers,and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Market for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving,investment,and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomic Models

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Short-Run Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters

The potential positive feedback that government spending may have on investment is know as the _.The potential negative effect that government spending may have on investment is know as the _ effect.

If the Federal Reserve's goal is to stabilize aggregate demand,then it will _ the money supply in response to a stock market boom.This causes interest rates to _.

The crowding-out effect occurs because an increase in government spending _ interest rates,causing _ to fall.