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

The idea that a decrease in the price level raises the real value of households' money holdings, which increases consumer spending and the quantity of goods and services demanded is known as

A decrease in government spending

​If the MPC changed from 0.8 to 0.6, then the spending multiplier would change from

Assume that there is no accelerator affect. The MPC = 3/4. The government increases both expenditures and taxes by $600. The effect of taxes on aggregate demand is 3/4 the size of that created by government expenditures alone. The crowding out effect is 1/5 as strong as the combined effect of government expenditures and taxes on aggregate demand. How much does aggregate demand shift by?

Monetary policy is determined by

Stock prices often rise when the Fed raises interest rates.

According to liquidity preference theory,

Policymakers use _____ policy and _____ policy to stabilize _____ and _____ in the short run.

Which of the following is an example of an increase in government purchases?

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

The Fed is concerned about stock market booms because the booms

When the Federal Funds rate is above the Federal Reserve's target, it will ____ bonds to _____ the money supply.

If the multiplier is 5.25, then the MPC is

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

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?

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

According to liquidity preference theory, if the price level decreases, then

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

Which of the following claims concerning the importance of effects that explain the slope of the U.S. aggregate-demand curve is correct?

When households decide to hold more money,