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

Figure 34-4. On the figure, MS represents money supply and MD represents money demand. -Refer to Figure 34-4. Suppose the money-demand curve is currently MD₁. If the current interest rate is r₂, then

Liquidity preference refers directly to Keynes' theory concerning

Which of the following shifts aggregate demand to the right?

One of President Obama's first fiscal policy initiatives was​

People hold money primarily because it

The government's choices regarding the overall level of government purchases and taxes is known as _____.

Fiscal policy is determined by

The _____ is the most important automatic stabilizer.

According to liquidity preference theory, a decrease in the price level causes the interest rate to

Suppose aggregate demand shifts to the left and policymakers want to stabilize output. What can they do?

A severe problem that many economists have with the active use of monetary policy and fiscal policy to stabilize the economy is that, while those policies obviously work well in practice, they are not well understood on a theoretical level.

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

The Kennedy tax cut of 1964 was

During recessions, unemployment insurance payments tend to rise.

When the interest rate is above the equilibrium level,

The change in aggregate demand that results from fiscal expansion changing the interest rate is called the

Monetary policy

An increase in government spending initially and primarily shifts

For the U.S. economy, money holdings are a

Sometimes, changes in monetary policy and/or fiscal policy are intended to offset changes to aggregate demand over which policymakers have little or no control.