Question 1

An increase in the money supply will

Accepted Answer

A) increase interest rates, decreasing investment and aggregate demand. 
B) reduce interest rates, increasing investment and aggregate demand. 
C) reduce interest rates, decreasing investment and increasing aggregate demand. 
D) increase interest rates, increasing investment and aggregate demand. 
A) increase interest rates, decreasing investment and aggregate demand. 
B) reduce interest rates, increasing investment and aggregate demand. 
C) reduce interest rates, decreasing investment and increasing aggregate demand. 
D) increase interest rates, increasing investment and aggregate demand.

Question 2

An implication of the Employment Act of 1946 is that the government should respond to changes in the private economy to stabilize aggregate demand.

Accepted Answer

A) True 
 B)False

Question 3

As the interest rate falls to equilibrium in the market for money,

Accepted Answer

A) the quantity of money demanded falls, which would reduce a shortage of money. 
B) the quantity of money demanded falls, which would reduce a surplus of money. 
C) the quantity of money demanded rises, which would reduce a shortage of money. 
D) the quantity of money demanded rises, which would reduce a surplus of money. 
A) the quantity of money demanded falls, which would reduce a shortage of money. 
B) the quantity of money demanded falls, which would reduce a surplus of money. 
C) the quantity of money demanded rises, which would reduce a shortage of money. 
D) the quantity of money demanded rises, which would reduce a surplus of money.

Question 4

Figure 34-1   ​
-Refer to Figure 34-1. There is an excess supply for money at an interest rate of

Accepted Answer

A) 4 percent. 
B) 2 percent. 
C) 3 percent. 
D) 5 percent. 
A) 4 percent. 
B) 2 percent. 
C) 3 percent. 
D) 5 percent.

Question 5

The theory of liquidity preference was developed by Irving Fisher.

Accepted Answer

A) True 
 B)False

Question 6

​Many economists oppose a constitutional amendment that would require a balanced budget for the federal government because it would probably make the business cycle more volatile.

Accepted Answer

A) True 
 B)False

Question 7

Monetary policy

Accepted Answer

A) must be described in terms of interest-rate targets. 
B) must be described in terms of money-supply targets. 
C) can be described either in terms of the money supply or in terms of the interest rate. 
D) cannot be accurately described in terms of the interest rate or in terms of the money supply. 
A) must be described in terms of interest-rate targets. 
B) must be described in terms of money-supply targets. 
C) can be described either in terms of the money supply or in terms of the interest rate. 
D) cannot be accurately described in terms of the interest rate or in terms of the money supply.

Question 8

During recessions, the government tends to run a budget deficit.

Accepted Answer

A) True 
 B)False

Question 9

If expected inflation is constant and the nominal interest rate increases by 4 percentage points, then the real interest rate

Accepted Answer

A) decreases by 4 percentage points. 
B) decreases, but by more than 4 percentage points. 
C) increases, but by more than 4 percentage points. 
D) increases by 4 percentage points. 
A) decreases by 4 percentage points. 
B) decreases, but by more than 4 percentage points. 
C) increases, but by more than 4 percentage points. 
D) increases by 4 percentage points.

Question 10

Critics of stabilization policy argue that monetary and fiscal policies affect the economy with _____.

Accepted Answer

The answer of Critics of stabilization policy argue that monetary...

Question 11

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

Accepted Answer

monetary,

Question 12

A decrease in the domestic _____ causes domestic goods to become less expensive relative to foreign goods and increases net exports. The increase in net exports causes a(n) _____ in the quantity of domestic aggregate goods and services demanded and is known as the _____ effect.

Accepted Answer

price leve

Question 13

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

Accepted Answer

demand, ou

Question 14

If the government faced a balanced budget rule, it would be forced to raise taxes or decrease spending during a recession.​

Accepted Answer

A) True 
 B)False

Question 15

Other things the same, which of the following responses would we expect from an increase in U.S. interest rates?

Accepted Answer

A) Your aunt puts more money in her savings account. 
B) Foreign citizens decide to buy fewer U.S.bonds. 
C) You decide to purchase a new oven for your cookie factory. 
D) More people decide to purchase a home using a mortgage loan. 
A) Your aunt puts more money in her savings account. 
B) Foreign citizens decide to buy fewer U.S.bonds. 
C) You decide to purchase a new oven for your cookie factory. 
D) More people decide to purchase a home using a mortgage loan.

Question 16

An increase in the money supply decreases the interest rate in the short run.

Accepted Answer

A) True 
 B)False

Question 17

To stabilize output, the Federal Reserve will _____ the money supply when aggregate demand falls.

Accepted Answer

The answer of To stabilize output, the Federal Reserve will...

Question 18

Suppose a wave of optimism causes firms to increase investment. To stabilize output and employment, the Federal Reserve will _____.

Accepted Answer

decrease t

Question 19

Figure 34-8   ​
-Refer to Figure 34-8. Households' desired money holdings are given by MD1. If the current rate of interest is r3, then there is excess _____. Households will _____ interest-earning assets, which causes the interest rate to _____.

Accepted Answer

Question 20

When the Fed buys government bonds, the reserves of the banking system

Accepted Answer

A) increase, so the money supply increases. 
B) increase, so the money supply decreases. 
C) decrease, so the money supply increases. 
D) decrease, so the money supply decreases. 
A) increase, so the money supply increases. 
B) increase, so the money supply decreases. 
C) decrease, so the money supply increases. 
D) decrease, so the money supply decreases.

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

An increase in the money supply will

An implication of the Employment Act of 1946 is that the government should respond to changes in the private economy to stabilize aggregate demand.

As the interest rate falls to equilibrium in the market for money,

Figure 34-1 ​ -Refer to Figure 34-1. There is an excess supply for money at an interest rate of

The theory of liquidity preference was developed by Irving Fisher.

​Many economists oppose a constitutional amendment that would require a balanced budget for the federal government because it would probably make the business cycle more volatile.

Monetary policy

During recessions, the government tends to run a budget deficit.

If expected inflation is constant and the nominal interest rate increases by 4 percentage points, then the real interest rate

Critics of stabilization policy argue that monetary and fiscal policies affect the economy with _____.

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

A decrease in the domestic _____ causes domestic goods to become less expensive relative to foreign goods and increases net exports. The increase in net exports causes a(n) _____ in the quantity of domestic aggregate goods and services demanded and is known as the _____ effect.

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

If the government faced a balanced budget rule, it would be forced to raise taxes or decrease spending during a recession.​

Other things the same, which of the following responses would we expect from an increase in U.S. interest rates?

An increase in the money supply decreases the interest rate in the short run.

To stabilize output, the Federal Reserve will _____ the money supply when aggregate demand falls.

Suppose a wave of optimism causes firms to increase investment. To stabilize output and employment, the Federal Reserve will _____.

Figure 34-8 ​ -Refer to Figure 34-8. Households' desired money holdings are given by MD1. If the current rate of interest is r3, then there is excess _____. Households will _____ interest-earning assets, which causes the interest rate to _____.

When the Fed buys government bonds, the reserves of the banking system

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

Applications: 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 Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers in Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Short-Run Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters

Figure 34-1 -Refer to Figure 34-1. There is an excess supply for money at an interest rate of

Many economists oppose a constitutional amendment that would require a balanced budget for the federal government because it would probably make the business cycle more volatile.

Policymakers use ___ policy and _ policy to stabilize _ and ___ in the short run.

A decrease in the domestic ___ causes domestic goods to become less expensive relative to foreign goods and increases net exports. The increase in net exports causes a(n) _ in the quantity of domestic aggregate goods and services demanded and is known as the ___ effect.

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

If the government faced a balanced budget rule, it would be forced to raise taxes or decrease spending during a recession.

Figure 34-8 -Refer to Figure 34-8. Households' desired money holdings are given by MD₁. If the current rate of interest is r₃, then there is excess ___. Households will _ interest-earning assets, which causes the interest rate to ___.