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

Which of the following is likely more important for explaining the slope of the aggregate-demand curve of a small economy than it is for the United States?

If,at some interest rate,the quantity of money demanded is greater than the quantity of money supplied,people will desire to

How does a reduction in the money supply by the Fed make owning stocks less attractive?

In the early 1960s,the Kennedy administration made considerable use of

An aide to a U.S.Congressman computes the effect on aggregate demand of a $20 billion tax cut.The actual increase in aggregate demand is less than the aide expected.Which of the following errors in the aide's computation would be consistent with an overestimation of the impact on aggregate demand?

Suppose households attempt to increase money holdings.To stabilize output and employment,the Federal Reserve will _____.

Unemployment insurance and welfare programs work as automatic stabilizers.

The Employment Act of 1946

If households view a tax cut as temporary,then the tax cut

If the marginal propensity to consume is 4/5,then a decrease in government spending of $1 billion decreases the demand for goods and services by $5 billion.

The most important automatic stabilizer is

People are likely to want to hold more money if the interest rate

Assuming no crowding-out,investment-accelerator,or multiplier effects,a $100 billion increase in government expenditures shifts aggregate demand

Assume the MPC is 0.625.Assuming only the multiplier effect matters,a decrease in government purchases of $10 billion will shift the aggregate demand curve to the

The primary argument against active monetary and fiscal policy is that

A decrease in government spending

When the Fed announces a target for the federal funds rate,it essentially accommodates the day-to-day fluctuations in money demand by adjusting the money supply accordingly.

Opponents of active stabilization policy

According to liquidity preference theory,equilibrium in the money market is achieved by adjustments in

An increase in government spending initially and primarily shifts