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

Why do people still hold cash in their wallets, despite the fact that they receive no returns compared to storing cash in their bank accounts?

In the long run, the interest rate adjusts to balance the supply and demand for money, whereas in the short run, the interest rate adjusts to balance national saving and desired investment.

The lag problem associated with monetary policy is due to:

What are the impacts of an expansionary fiscal policy on output and the inflation rate in the short run? How about in the long run?

If the economy is producing a real output that is less than capacity output, a(n):

Assume there is no crowding-out effect.If an increase in government spending of $10 billion raises the total aggregate demand by $50 billion, then the marginal propensity is:

If the marginal propensity to save is 0.3, then the corresponding marginal propensity to consume must be ____.

Define expansionary and contractionary fiscal policy, giving examples of each.

If the economy is in a recession, an appropriate combination of monetary and fiscal policies might be to:

In the short run:

Why could there be a great deal of frustration for policy makers when the long-term effects of their decisions do not seem to flow through, as they wanted?

If an economy goes into an expansion, then the government's:

The positive feedback from demand to investment is called: