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

In 2009 President Obama and Congress increased government spending. Some economists thought this increase would have little effect on output. Which of the following would make the effect of an increase in government expenditures on aggregate demand smaller?

People will want to hold more money if the price level

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

Which of the following properly describes the interest-rate effect?

Some economists, called supply-siders, argue that changes in the money supply exert a strong influence on aggregate supply.

If the Fed conducts open-market sales, the money supply

In recent years, the Federal Reserve has conducted policy by setting a target for the

Critics of stabilization policy argue that

​Which of the following events shifts the aggregate-demand curve leftward?

The government buys new weapons systems. The manufacturers of weapons pay their employees. The employees spend this money on goods and services. The firms from which the employees buy the goods and services pay their employees. This sequence of events illustrates

When the Federal Reserve increases the Federal Funds target rate, it achieves this target by

According to liquidity preference theory, if the quantity of money supplied is greater than the quantity demanded, then the interest rate will

If the MPC = 4/5, then the government purchases multiplier is

Scenario 34-2. The following facts apply to a small, imaginary economy. • Consumption spending is $6,720 when income is $8,000. • Consumption spending is $7,040 when income is $8,500. -Refer to Scenario 34-2. The multiplier for this economy is

When taxes increase, the interest rate

Figure 34-2. 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 34-2. As we move from one point to another along the money-demand curve MD₁,

If the MPC is 3/5 then the multiplier is

Other things the same, which of the following responses would we expect to result from a decrease in U.S. interest rates?

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

The price of imported oil rises. If the government wanted to stabilize output, which of the following could it do?