Question 1

Other things the same,automatic stabilizers tend to

Accepted Answer

A) raise expenditures during expansions and recessions. 
B) lower expenditures during expansions and recessions. 
C) raise expenditures during recessions and lower expenditures during expansions. 
D) raise expenditures during expansions and lower expenditures during recessions. 
A) raise expenditures during expansions and recessions. 
B) lower expenditures during expansions and recessions. 
C) raise expenditures during recessions and lower expenditures during expansions. 
D) raise expenditures during expansions and lower expenditures during recessions.

Question 2

Other things equal,in the short run a higher price level leads households to

Accepted Answer

A) increase consumption and firms to buy more capital goods. 
B) increase consumption and firms to buy fewer capital goods. 
C) decrease consumption and firms to buy more capital goods. 
D) decrease consumption and firms to buy fewer capital goods. 
A) increase consumption and firms to buy more capital goods. 
B) increase consumption and firms to buy fewer capital goods. 
C) decrease consumption and firms to buy more capital goods. 
D) decrease consumption and firms to buy fewer capital goods.

Question 3

Other things the same,which of the following responses would we expect to result 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) All of the above are correct. 
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) All of the above are correct.

Question 4

Which of the following illustrates how the investment accelerator works?

Accepted Answer

A) An increase in government expenditures increases aggregate spending so that Gas-n-Go decides to modernize its gas stations. 
B) An increase in government expenditures increases the interest rate so that Gas-n-Go decides to modernize its gas stations. 
C) An increase in government expenditures increases the interest rate so that the demand for stocks and bonds issued by Gas-n-Go rises. 
D) An increase in government expenditures decreases the interest rate so that Gas-n-Go decides to modernize its gas stations. 
A) An increase in government expenditures increases aggregate spending so that Gas-n-Go decides to modernize its gas stations. 
B) An increase in government expenditures increases the interest rate so that Gas-n-Go decides to modernize its gas stations. 
C) An increase in government expenditures increases the interest rate so that the demand for stocks and bonds issued by Gas-n-Go rises. 
D) An increase in government expenditures decreases the interest rate so that Gas-n-Go decides to modernize its gas stations.

Question 5

The government purchases multiplier is defined as

Accepted Answer

A) 1/MPC. 
B) 1/(1 - MP
C) . 
C) MPC/(1 - MP
C) . 
D) (1 - MP
C) /MPC. 
A) 1/MPC. 
B) 1/(1 - MP
C) . 
C) MPC/(1 - MP
C) . 
D) (1 - MP
C) /MPC.

Question 6

In the short run,open-market sales

Accepted Answer

A) increase the price level and real GDP. 
B) decrease the price level and real GDP. 
C) increases the price level and decreases real GDP. 
D) decreases the price level and increases real GDP. 
A) increase the price level and real GDP. 
B) decrease the price level and real GDP. 
C) increases the price level and decreases real GDP. 
D) decreases the price level and increases real GDP.

Question 7

Supply-side economists believe that changes in government purchases affect

Accepted Answer

A) only aggregate demand. 
B) only aggregate supply. 
C) both aggregate demand and aggregate supply. 
D) neither aggregate demand nor aggregate supply. 
A) only aggregate demand. 
B) only aggregate supply. 
C) both aggregate demand and aggregate supply. 
D) neither aggregate demand nor aggregate supply.

Question 8

Assume the multiplier is 5 and that the total crowding-out effect is $20 billion.An increase in government purchases of $10 billion when the multiplier is 5 will shift the aggregate demand curve

Accepted Answer

A) right $150 billion. 
B) right $70 billion. 
C) right $30 billion. 
D) None of the above is correct. 
A) right $150 billion. 
B) right $70 billion. 
C) right $30 billion. 
D) None of the above is correct.

Question 9

Assuming no crowding-out,investment-accelerator,or multiplier effects,a $100 billion increase in government expenditures shifts aggregate demand

Accepted Answer

A) right by more than $100 billion. 
B) right by $100 billion. 
C) left by more than $100 billion. 
D) left by $100 billion. 
A) right by more than $100 billion. 
B) right by $100 billion. 
C) left by more than $100 billion. 
D) left by $100 billion.

Question 10

Both the multiplier and the investment accelerator tend to make the aggregate demand curve shift farther than the initial increase in government expenditures.

Accepted Answer

A) True 
 B)False

Question 11

When the government reduces taxes,which of the following decreases?

Accepted Answer

A) consumption 
B) take-home pay 
C) household saving 
D) None of the above is correct. 
A) consumption 
B) take-home pay 
C) household saving 
D) None of the above is correct.

Question 12

Liquidity preference refers directly to Keynes' theory concerning

Accepted Answer

A) the effects of changes in money demand and supply on interest rates. 
B) the effects of changes in money demand and supply on exchange rates. 
C) the effects of wealth on expenditures. 
D) the difference between temporary and permanent changes in income. 
A) the effects of changes in money demand and supply on interest rates. 
B) the effects of changes in money demand and supply on exchange rates. 
C) the effects of wealth on expenditures. 
D) the difference between temporary and permanent changes in income.

Question 13

Changes in the interest rate bring the money market into equilibrium according to

Accepted Answer

A) both liquidity preference theory and classical theory. 
B) neither liquidity preference theory nor classical theory. 
C) liquidity preference theory, but not classical theory. 
D) classical theory, but not liquidity preference theory. 
A) both liquidity preference theory and classical theory. 
B) neither liquidity preference theory nor classical theory. 
C) liquidity preference theory, but not classical theory. 
D) classical theory, but not liquidity preference theory.

Question 14

Which of the following is correct?

Accepted Answer

A) Both liquidity preference and classical theory assume the interest rate adjusts to bring the money market into equilibrium. 
B) Both liquidity preference and classical theory assume the price level adjusts to bring the money market into equilibrium. 
C) Liquidity preference theory assumes the interest rate adjusts to bring the money market into equilibrium.Classical theory assumes the price level adjusts to bring the money market into equilibrium. 
D) Liquidity preference theory assumes the price level adjusts to bring the money market into equilibrium.Classical theory assumes the interest rate adjusts to bring the money market into equilibrium. 
A) Both liquidity preference and classical theory assume the interest rate adjusts to bring the money market into equilibrium. 
B) Both liquidity preference and classical theory assume the price level adjusts to bring the money market into equilibrium. 
C) Liquidity preference theory assumes the interest rate adjusts to bring the money market into equilibrium.Classical theory assumes the price level adjusts to bring the money market into equilibrium. 
D) Liquidity preference theory assumes the price level adjusts to bring the money market into equilibrium.Classical theory assumes the interest rate adjusts to bring the money market into equilibrium.

Question 15

The government buys new weapons systems.The manufacturers of weapons pay their employees.The employees spend this money on goods and services.The firms they buy goods and services from pay their employees.This illustrates

Accepted Answer

A) the crowding-out effect. 
B) the multiplier effect. 
C) the Fisher effect. 
D) None of the above is correct. 
A) the crowding-out effect. 
B) the multiplier effect. 
C) the Fisher effect. 
D) None of the above is correct.

Question 16

Suppose that the MPC is .60 and there is no investment accelerator or crowding- out effects.If government expenditures increase $20 billion,aggregate demand

Accepted Answer

A) shifts right $80 billion. 
B) shifts right $50 billion. 
C) shifts right $32 billion. 
D) None of the above is correct. 
A) shifts right $80 billion. 
B) shifts right $50 billion. 
C) shifts right $32 billion. 
D) None of the above is correct.

Question 17

Which of the following tends to make aggregate demand shift right farther than the amount government expenditures increase?

Accepted Answer

A) the crowding-out effect 
B) the multiplier effect 
C) the wealth effect 
D) the interest-rate effect 
A) the crowding-out effect 
B) the multiplier effect 
C) the wealth effect 
D) the interest-rate effect

Question 18

Liquidity preference theory is most relevant to the

Accepted Answer

A) short run and supposes that the price level adjusts to bring money supply and money demand into balance. 
B) short run and supposes that the interest rate adjusts to bring money supply and money demand into balance. 
C) long run and supposes that the price level adjusts to bring money supply and money demand into balance. 
D) long run and supposes that the interest rate adjusts to bring money supply and money demand into balance. 
A) short run and supposes that the price level adjusts to bring money supply and money demand into balance. 
B) short run and supposes that the interest rate adjusts to bring money supply and money demand into balance. 
C) long run and supposes that the price level adjusts to bring money supply and money demand into balance. 
D) long run and supposes that the interest rate adjusts to bring money supply and money demand into balance.

Question 19

In the long run,the level of output

Accepted Answer

A) depends on the money supply. 
B) depends on the price level. 
C) is determined by supply-side factors. 
D) All of the above are correct. 
A) depends on the money supply. 
B) depends on the price level. 
C) is determined by supply-side factors. 
D) All of the above are correct.

Question 20

Other things the same,as the price level rises

Accepted Answer

A) the interest rate rises causing aggregate demand to shift. 
B) the interest rate rises causing a movement along a given aggregate demand curve. 
C) the interest rate falls causing aggregate demand to shift. 
D) the interest rate falls causing a movement along a given aggregate demand curve. 
A) the interest rate rises causing aggregate demand to shift. 
B) the interest rate rises causing a movement along a given aggregate demand curve. 
C) the interest rate falls causing aggregate demand to shift. 
D) the interest rate falls causing a movement along a given aggregate demand curve.

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

Other things the same,automatic stabilizers tend to

Other things equal,in the short run a higher price level leads households to

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

Which of the following illustrates how the investment accelerator works?

The government purchases multiplier is defined as

In the short run,open-market sales

Supply-side economists believe that changes in government purchases affect

Assume the multiplier is 5 and that the total crowding-out effect is $20 billion.An increase in government purchases of $10 billion when the multiplier is 5 will shift the aggregate demand curve

Assuming no crowding-out,investment-accelerator,or multiplier effects,a $100 billion increase in government expenditures shifts aggregate demand

Both the multiplier and the investment accelerator tend to make the aggregate demand curve shift farther than the initial increase in government expenditures.

When the government reduces taxes,which of the following decreases?

Liquidity preference refers directly to Keynes' theory concerning

Changes in the interest rate bring the money market into equilibrium according to

Which of the following is correct?

The government buys new weapons systems.The manufacturers of weapons pay their employees.The employees spend this money on goods and services.The firms they buy goods and services from pay their employees.This illustrates

Suppose that the MPC is .60 and there is no investment accelerator or crowding- out effects.If government expenditures increase $20 billion,aggregate demand

Which of the following tends to make aggregate demand shift right farther than the amount government expenditures increase?

Liquidity preference theory is most relevant to the

In the long run,the level of output

Other things the same,as the price level rises

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Applications

Supply, demand, and Government Policies

Consumers, producers, and the Efficiency of Markets

Application: 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

Oligopoly

Monopolistic Competition

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, investment, and the Financial System

The Basic Tools of Finance

Unemployment

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 Trade Off Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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