Exam 21: The Influence of Monetary and Fiscal Policy on Aggregate Demand

Figure 21-4. On the figure, MS represents money supply and MD represents money demand. -Refer to Figure 21-4. Which of the following events could explain a shift of the money-demand curve from MD₁ to MD₂?

In a certain economy, when income is $200, consumer spending is $145. The value of the multiplier for this economy is 6.25. It follows that, when income is $230, consumer spending is

Suppose investment spending falls. To offset the change in output the Federal Reserve could

Paul Samuelson, a famous economist, said that

An increase in government spending on goods to build or repair infrastructure

Liquidity preference refers directly to Keynes' theory concerning

When the Fed decreases the money supply, we expect

People will want to hold less money if the price level

According to the theory of liquidity preference, if output increases

An aide to a U.S. Congressman computes the effect on aggregate demand of a $20 billion tax cut. The actual increase in aggregate demand is less than the aide expected. Which of the following errors in the aide's computation would be consistent with an overestimation of the impact on aggregate demand?

Explain why the interest rate is the opportunity cost of holding currency. What is the benefit of holding currency?

In the graph of the money market, the money supply curve is

Monetary policy

Scenario 21-1. Take the following information as given for a small, imaginary economy: - When income is $\$ 10,000$ , consingtion spending is $\$ 6,500$ - Whan income is $\$ 11,000$ , cansumption spending is $\$ 7,300$ -Refer to Scenario 21-1. For this economy, an initial increase of $500 in net exports translates into a

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

Which of the following claims concerning the importance of effects that explain the slope of the U.S. aggregate-demand curve is correct?

Changes in the interest rate help explain

If the interest rate increases

Who asserted that "the Federal Reserve's job is to take away the punch bowl just as the party gets going?"

Which of the following is correct?