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

If businesses and consumers become pessimistic, the Federal Reserve can attempt to reduce the impact on the price level and real GDP by

Tax increases

The multiplier effect states that there are additional shifts in aggregate demand from fiscal policy, because it

Which of the following is not an automatic stabilizer?

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. A decrease in Y from Y₁ to Y₂ is explained as follows:

A policy that results in slow and steady growth of the money supply is an example of

An increase in households' desired money holding causes a(n) _____ in interest rates. This causes a(n) _____ in investment spending and aggregate demand.

Which of the following events shifts aggregate demand rightward?

When government expenditures increase, the interest rate

The multiplier is computed as MPC / (1 - MPC).

In 1961, President John F. Kennedy, acting upon advice from his economists, proposed tax cuts. The advice he received

Suppose an increase in interest rates causes rising unemployment and falling output. To counter this, the Federal Reserve would

Which particular interest rate(s) do we attempt to explain using the theory of liquidity preference?

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

Figure 34-8 -Refer to Figure 34-8. An increase in government purchases will

According to the theory of liquidity preference, an increase in the price level causes the

An increase in the money supply shifts the aggregate-supply curve to the right.

A reduction in personal income taxes increases Aggregate Demand through

The _____ effect states that a lower price level reduces the amount of money people wish to hold. When they lend out their excess savings, the _____ falls causing investment spending to rise and increases the quantity of goods and services demanded.

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