Question 1

When the Fed decreases the money supply we expect

Accepted Answer

A) interest rates and stock prices to rise. 
B) interest rates and stock prices to fall. 
C) interest rates to rise and stock prices to fall. 
D) interest rates to fall and stock prices to rise. 
A) interest rates and stock prices to rise. 
B) interest rates and stock prices to fall. 
C) interest rates to rise and stock prices to fall. 
D) interest rates to fall and stock prices to rise.

Question 2

If the MPC = .85,then the government purchases multiplier is about

Accepted Answer

A) 1.18. 
B) 3.33. 
C) 6.67. 
D) 8.5. 
A) 1.18. 
B) 3.33. 
C) 6.67. 
D) 8.5.

Question 3

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

Accepted Answer

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

Question 4

According to the theory of liquidity preference,which variable adjusts to balance the supply and demand for money?

Accepted Answer

A) interest rate 
B) money supply 
C) quantity of output 
D) price level 
A) interest rate 
B) money supply 
C) quantity of output 
D) price level

Question 5

Supply-side economists believe that a reduction in the tax rate

Accepted Answer

A) always decrease government tax revenue. 
B) shifts the aggregate supply curve to the right. 
C) provides no incentive for people to work more. 
D) would decrease consumption. 
A) always decrease government tax revenue. 
B) shifts the aggregate supply curve to the right. 
C) provides no incentive for people to work more. 
D) would decrease consumption.

Question 6

Tax cuts

Accepted Answer

A) and increases in government expenditures shift aggregate demand right. 
B) and increases in government expenditures shift aggregate demand left. 
C) shift aggregate demand right while increases in government expenditures shift aggregate demand left. 
D) shift aggregate demand left while increases in government expenditures shift aggregate demand right. 
A) and increases in government expenditures shift aggregate demand right. 
B) and increases in government expenditures shift aggregate demand left. 
C) shift aggregate demand right while increases in government expenditures shift aggregate demand left. 
D) shift aggregate demand left while increases in government expenditures shift aggregate demand right.

Question 7

If the Federal Reserve decided to lower interest rates,it could

Accepted Answer

A) buy bonds to lower the money supply. 
B) buy bonds to raise the money supply. 
C) sell bonds to lower the money supply. 
D) sell bonds to raise the money supply. 
A) buy bonds to lower the money supply. 
B) buy bonds to raise the money supply. 
C) sell bonds to lower the money supply. 
D) sell bonds to raise the money supply.

Question 8

Suppose the MPC is .75.There are no crowding out or investment accelerator effects.If the government increases expenditures by $200 billion how far does aggregate demand shift? If the government decreases taxes by $200 billion how far does aggregate demand shift?

Accepted Answer

A) $800 billion and $800 billion 
B) $800 billion and $600 billion 
C) $600 billion and $600 billion 
D) $600 billion and $450 billion 
A) $800 billion and $800 billion 
B) $800 billion and $600 billion 
C) $600 billion and $600 billion 
D) $600 billion and $450 billion

Question 9

For the most part,fiscal policy affects the economy in the short run while monetary policy primarily matters in the long run.

Accepted Answer

A) True 
 B)False

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

When the Fed decreases the money supply we expect

If the MPC = .85,then the government purchases multiplier is about

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

According to the theory of liquidity preference,which variable adjusts to balance the supply and demand for money?

Supply-side economists believe that a reduction in the tax rate

Tax cuts

If the Federal Reserve decided to lower interest rates,it could

Suppose the MPC is .75.There are no crowding out or investment accelerator effects.If the government increases expenditures by $200 billion how far does aggregate demand shift? If the government decreases taxes by $200 billion how far does aggregate demand shift?

For the most part,fiscal policy affects the economy in the short run while monetary policy primarily matters in the long run.

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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