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

According to the liquidity-preference theory,equilibrium in the money market is achieved by adjustments in which of the following?

In the short run,what effect does an increase in the money supply have on interest rates and aggregate demand?

During recessions,what do taxes tend to do,and to what effect?

Which of the following actions might we logically expect to result from rising stock prices?

Which of the following is the most important automatic stabilizer?

The multiplier is equal to MPC/(1 - MPC).

Which of the following lists of events is consistent with the short-run economic theories studied?

This question considers how an economy changes over time and how the aggregate demand and supply model treats the time dimension of an economy. a)How do the aggregate-demand and aggregate-supply curves shift over time? b)Related to point a,identify and discuss the limitations to the simple,"static" aggregate-demand and aggregate-supply model.What are the consequences of predicting phenomena that have a time dimension (remember the 'short-run' and 'long-run' distinction)using an essentially static model? c)How could the static model be changed to better incorporate the time dimension of the economic variables it tries to explain?

Explain how unemployment insurance acts as an automatic stabilizer.

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

Suppose the closed economy is in long-run equilibrium.Pessimism on the part of investors then shifts the aggregate-demand curve $50 billion to the left.The government wants to increase spending in order to avoid a recession.If the crowding-out effect is always half as strong as the multiplier effect,and if the MPC equals 0.8,by how much do government purchases have to rise?

When Parliament reduces spending in order to balance the budget,which of the following does it need to consider?

Permanent tax cuts have a larger impact on consumption spending than temporary ones.

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

Why do people primarily own or hold money?

Explain the logic according to liquidity preference theory by which an increase in the money supply changes the aggregate demand curve.

Suppose the closed economy is in long-run equilibrium.Immigration of skilled workers shifts the long-run aggregate supply curve $60 billion to the right.At the same time,government purchases increase by $40 billion.If the MPC equals 0.75 and the crowding-out effect is $160 billion,what would we expect to happen in the long-run to real GDP and the price level?

In the long run,which of the following do changes in the money supply affect?

Which of the following shifts aggregate demand right?

Which of the following is most likely to happen in the short run?