Exam 15: The Influence of Monetary and Fiscal Policy on Aggregate Demand

If at some interest rate the quantity of money demanded is greater than the quantity of money supplied,what will people desire to do and what will happen to the interest rate?

Most economists believe that fiscal policy affects which of the following?

Which of the following tends to make the size of a shift in aggregate demand resulting from a tax change smaller than otherwise?

Fiscal policy refers to the idea that aggregate demand is changed by changes in what?

What does a monetary injection by the Bank of Canada do to interest rates and aggregate demand?

If households view a tax cut as being temporary,how does the tax cut affect aggregate demand?

Compare the classical model of money market with the liquidity preference model. a. Are they consistent with each other? b. Draw the classical money-demand curve in a Price-Quantity-of-money diagram. c. How does your money-demand curve shift when income, Y, increases? d. Use your classical money-demand diagram to derive an aggregate-demand curve.

According to the liquidity-preference theory,how does an increase in the price level affect the interest rate?

Suppose the closed economy is in long-run equilibrium.Immigration of skilled workers shifts the long-run aggregate-supply curve $120 billion to the right.At the same time,government purchases increase by $50 billion.If the MPC equals 0.75 and the crowding-out effect is $80 billion,what would we expect to happen in the long run to real GDP and the price level?

According to liquidity-preference theory,what is the shape of the money-supply curve?

Suppose that consumers become pessimistic about the future health of the economy,and so cut back on their consumption spending.What will happen to aggregate demand and to output? What might the government have to do to keep output stable?

Let us derive an aggregate-demand curve starting from some money demand and money supply equations.Assume the money-demand curve is MD=150 - 15r + Y,the price level depends on r according to the equation P = 100 - 10r,and the money supply is MS = 100.Find a relationship between the price level P and output Y and show that the relation that you have found is an aggregate demand function.

If the Bank of Canada conducts open-market purchases,how do the money supply and the aggregate demand change?

In a small open economy with a flexible exchange rate,a monetary injection causes which of the following?

Which of the following shifts aggregate demand to the left?

When the Bank of Canada buys government bonds,how do the reserves of the banking system change and what happens to the money supply?

If the interest rate is above a central bank's target,what should the central bank do?

In a small open economy with perfect capital mobility,if the Bank of Canada chooses to fix the value of the Canadian dollar,what will a contractionary monetary policy do?

What do open-market sales do to the price level and real GDP?

Figure 15-2 -Refer to the Figure 15-2.If the closed economy is at point b,the best policy to restore full employment is which of the following?