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

Depending on the size of the multiplier and crowding-out effects, the rightward shift in aggregate demand from a tax cut could be larger or smaller than the tax cut.

If the inflation rate is zero, then the nominal and real interest rate are the same.

If the marginal propensity to consume is 6/7, then the multiplier is 7.

Suppose that the government increases expenditures by $150 billion while increasing taxes by $150 billion. Suppose that the MPC is .80 and that there are no crowding out or accelerator effects. What is the combined effects of these changes? Why is the combined change not equal to zero?

Which of the following properly describes the interest-rate effect that helps explain the slope of the aggregate-demand curve?

If net exports fall $40 billion, the MPC is 9/11, and there is a multiplier effect but no crowding out and no investment accelerator, then

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