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

If businesses and consumers become pessimistic,the Federal Reserve can attempt to reduce the impact on the price level and real GDP by

If the Fed conducts open-market sales,which of the following three increase: interest rates,prices,investment spending?

If households view a tax cut as temporary,the tax cut

Explain how unemployment insurance acts as an automatic stabilizer.

According to liquidity preference theory,equilibrium in the money market is achieved by adjustments in

Describe the process in the money market by which the interest rate reaches its equilibrium value if it starts above equilibrium.

When Congress reduces spending in order to balance the budget,it needs to consider

An increase in government spending initially and primarily shifts

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

Supply-side economists focus more than other economists on

A significant lag for monetary policy is the time it takes to for a change in the money supply to change the economy.A significant lag for fiscal policy is the time it takes to pass legislation authorizing it.

The Fed is concerned about stock market booms because the booms

The Kennedy tax cut of 1964 included an investment tax credit designed to

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

The wealth effect helps explain the slope of the aggregate demand curve.This effect is

When the Fed increases the money supply,the interest rate decreases.This decrease in the interest rate increases consumption and investment demand so the aggregate demand curve shifts to the right.

Which of the following correctly explains the crowding-out effect?

Which of the following shifts money demand to the left?

If there is excess money supply,people will

If expected inflation is constant,then when the nominal interest rate falls,the real interest rate