Question 1

Suppose there were a large decline in net exports.If the Fed wanted to stabilize output,it could

Accepted Answer

A)  buy bonds to raise interest rates. 
B)  buy bonds to lower interest rates. 
C)  sell bonds to raise interest rates. 
D)  sell bonds to lower interest rates. 
A)  buy bonds to raise interest rates. 
B)  buy bonds to lower interest rates. 
C)  sell bonds to raise interest rates. 
D)  sell bonds to lower interest rates.

Question 2

Other things the same,automatic stabilizers tend to

Accepted Answer

A)  raise expenditures during expansions and recessions. 
B)  lower expenditures during expansions and recessions. 
C)  raise expenditures during recessions and lower expenditures during expansions. 
D)  raise expenditures during expansions and lower expenditures during recessions. 
A)  raise expenditures during expansions and recessions. 
B)  lower expenditures during expansions and recessions. 
C)  raise expenditures during recessions and lower expenditures during expansions. 
D)  raise expenditures during expansions and lower expenditures during recessions.

Question 3

The ease with which an asset can be converted into the medium of exchange is known as _____.

Accepted Answer

The answer of The ease with which an asset can...

Question 4

Liquidity preference theory is most relevant to the

Accepted Answer

A)  short run and supposes that the price level adjusts to bring money supply and money demand into balance. 
B)  short run and supposes that the interest rate adjusts to bring money supply and money demand into balance. 
C)  long run and supposes that the price level adjusts to bring money supply and money demand into balance. 
D)  long run and supposes that the interest rate adjusts to bring money supply and money demand into balance. 
A)  short run and supposes that the price level adjusts to bring money supply and money demand into balance. 
B)  short run and supposes that the interest rate adjusts to bring money supply and money demand into balance. 
C)  long run and supposes that the price level adjusts to bring money supply and money demand into balance. 
D)  long run and supposes that the interest rate adjusts to bring money supply and money demand into balance.

Question 5

Monetary policy and fiscal policy are the only factors that influence aggregate demand.

Accepted Answer

A) True 
 B)False

Question 6

Most economists believe that fiscal policy

Accepted Answer

A)  only affects aggregate demand and not aggregate supply. 
B)  primarily affects aggregate demand. 
C)  primarily effects aggregate supply. 
D)  only affects aggregate supply and not aggregate demand. 
A)  only affects aggregate demand and not aggregate supply. 
B)  primarily affects aggregate demand. 
C)  primarily effects aggregate supply. 
D)  only affects aggregate supply and not aggregate demand.

Question 7

Assume there is a multiplier effect,some crowding out,and no accelerator effect.An increase in government expenditures changes aggregate demand more,

Accepted Answer

A)  the smaller the MPC and the stronger the influence of income on money demand. 
B)  the smaller the MPC and the weaker the influence of income on money demand. 
C)  the larger the MPC and the stronger the influence of income on money demand. 
D)  the larger the MPC and the weaker the influence of income on money demand. 
A)  the smaller the MPC and the stronger the influence of income on money demand. 
B)  the smaller the MPC and the weaker the influence of income on money demand. 
C)  the larger the MPC and the stronger the influence of income on money demand. 
D)  the larger the MPC and the weaker the influence of income on money demand.

Question 8

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?

Accepted Answer

A)  When r = r2,nominal output is higher than it is when r = r1. 
B)  When r = r2,real output is higher than it is when r = r1. 
C)  When r = r2,the expected rate of inflation is higher than it is when r = r1. 
D)  If the velocity of money is 4 when r = r2,then the quantity of money is $3,000. 
A)  When r = r2,nominal output is higher than it is when r = r1. 
B)  When r = r2,real output is higher than it is when r = r1. 
C)  When r = r2,the expected rate of inflation is higher than it is when r = r1. 
D)  If the velocity of money is 4 when r = r2,then the quantity of money is $3,000.

Question 9

Figure 21-7.  
-Refer to Figure 21-7.If the economy is at point b,a policy to restore full employment would be

Accepted Answer

A)  an increase in the money supply. 
B)  a decrease in government purchases. 
C)  an increase in taxes. 
D)  All of the above are correct. 
A)  an increase in the money supply. 
B)  a decrease in government purchases. 
C)  an increase in taxes. 
D)  All of the above are correct.

Question 10

In the short run,an increase in the money supply causes interest rates to

Accepted Answer

A)  increase,and aggregate demand to shift right. 
B)  increase,and aggregate demand to shift left. 
C)  decrease,and aggregate demand to shift right. 
D)  decrease,and aggregate demand to shift left. 
A)  increase,and aggregate demand to shift right. 
B)  increase,and aggregate demand to shift left. 
C)  decrease,and aggregate demand to shift right. 
D)  decrease,and aggregate demand to shift left.

Question 11

If the Federal Reserve increases the money supply,then initially people want to

Accepted Answer

A)  sell bonds so the interest rate rises. 
B)  sell bonds so the interest rate falls. 
C)  buy bonds so the interest rate rises. 
D)  buy bonds so the interest rate falls. 
A)  sell bonds so the interest rate rises. 
B)  sell bonds so the interest rate falls. 
C)  buy bonds so the interest rate rises. 
D)  buy bonds so the interest rate falls.

Question 12

Because the liquidity-preference framework focuses on the

Accepted Answer

A)  short run,it assumes the price level adjusts to bring the money market to equilibrium. 
B)  short run,it assumes the interest rate adjusts to bring the money market to equilibrium. 
C)  long run,it assumes the price level adjusts to bring the money market to equilibrium. 
D)  long run,it assumes the interest rate adjusts to bring the money market to equilibrium. 
A)  short run,it assumes the price level adjusts to bring the money market to equilibrium. 
B)  short run,it assumes the interest rate adjusts to bring the money market to equilibrium. 
C)  long run,it assumes the price level adjusts to bring the money market to equilibrium. 
D)  long run,it assumes the interest rate adjusts to bring the money market to equilibrium.

Question 13

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.If the money-supply curve MS on the left-hand graph were to shift to the right,this would

Accepted Answer

A)  represent an action taken by the Federal Reserve. 
B)  shift the AD curve to the left. 
C)  create,until the interest rate adjusted,an excess demand for money at the interest rate that equilibrated the money market before the shift. 
D)  All of the above are correct. 
A)  represent an action taken by the Federal Reserve. 
B)  shift the AD curve to the left. 
C)  create,until the interest rate adjusted,an excess demand for money at the interest rate that equilibrated the money market before the shift. 
D)  All of the above are correct.

Question 14

To stabilize interest rates,the Federal Reserve will respond to an increase in money demand by

Accepted Answer

A)  buying government bonds,which decreases the supply of money. 
B)  selling government bonds,which increases the supply of money. 
C)  buying government bonds,which increases the supply of money. 
D)  selling government bonds,which decreases the supply of money. 
A)  buying government bonds,which decreases the supply of money. 
B)  selling government bonds,which increases the supply of money. 
C)  buying government bonds,which increases the supply of money. 
D)  selling government bonds,which decreases the supply of money.

Question 15

When households decide to hold more money,

Accepted Answer

A)  interest rates fall and investment decreases. 
B)  interest rates fall and investment increases. 
C)  interest rates rise and investment increases. 
D)  interest rates rise and investment decreases. 
A)  interest rates fall and investment decreases. 
B)  interest rates fall and investment increases. 
C)  interest rates rise and investment increases. 
D)  interest rates rise and investment decreases.

Question 16

People will want to hold more money if the price level

Accepted Answer

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

Question 17

The interest-rate effect is partially explained by the fact that a higher price level reduces money demand.

Accepted Answer

A) True 
 B)False

Question 18

The goal of stabilization policy is to stabilize aggregate _____.As a result,stabilization policy will also stabilize _____ and _____.

Accepted Answer

demand,out

Question 19

Which of the following properly describes the interest-rate effect that helps explain the slope of the aggregate-demand curve?

Accepted Answer

A)  As the money supply increases,the interest rate falls,so spending rises. 
B)  As the money supply increases,the interest rate rises,so spending falls. 
C)  As the price level increases,the interest rate falls,so spending rises. 
D)  As the price level increases,the interest rate rises,so spending falls. 
A)  As the money supply increases,the interest rate falls,so spending rises. 
B)  As the money supply increases,the interest rate rises,so spending falls. 
C)  As the price level increases,the interest rate falls,so spending rises. 
D)  As the price level increases,the interest rate rises,so spending falls.

Question 20

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

Accepted Answer

A)  an increase in the interest rate or an increase in the price level 
B)  an increase in the interest rate,but not an increase in the price level 
C)  an increase in the price level,but not an increase in the interest rate 
D)  neither an increase in the interest rate nor an increase in the price level 
A)  an increase in the interest rate or an increase in the price level 
B)  an increase in the interest rate,but not an increase in the price level 
C)  an increase in the price level,but not an increase in the interest rate 
D)  neither an increase in the interest rate nor an increase in the price level

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

Suppose there were a large decline in net exports.If the Fed wanted to stabilize output,it could

Other things the same,automatic stabilizers tend to

The ease with which an asset can be converted into the medium of exchange is known as _____.

Liquidity preference theory is most relevant to the

Monetary policy and fiscal policy are the only factors that influence aggregate demand.

Most economists believe that fiscal policy

Assume there is a multiplier effect,some crowding out,and no accelerator effect.An increase in government expenditures changes aggregate demand more,

Figure 21-7. -Refer to Figure 21-7.If the economy is at point b,a policy to restore full employment would be

In the short run,an increase in the money supply causes interest rates to

If the Federal Reserve increases the money supply,then initially people want to

Because the liquidity-preference framework focuses on the

To stabilize interest rates,the Federal Reserve will respond to an increase in money demand by

When households decide to hold more money,

People will want to hold more money if the price level

The interest-rate effect is partially explained by the fact that a higher price level reduces money demand.

The goal of stabilization policy is to stabilize aggregate _____.As a result,stabilization policy will also stabilize _____ and _____.

Which of the following properly describes the interest-rate effect that helps explain the slope of the aggregate-demand curve?

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

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 goal of stabilization policy is to stabilize aggregate ___.As a result,stabilization policy will also stabilize _ and ___.