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

In a small open economy with a flexible exchange rate, an expansionary fiscal policy will cause which of the following to happen?

For the Canadian economy, which of the following is the LEAST important reason for the downward slope of the aggregate-demand curve?

According to liquidity preference theory, how does a decrease in the price level affect the interest rate and output demanded, respectively?

Which of the following shifts money demand to the right?

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

According to the crowding-out effect, how do the interest rate and investment spending change when government spending increases?

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

In the short run, an increase in the money supply causes interest rates and aggregate demand to do what?

Over what period of time is the liquidity preference theory most relevant, and what does it suppose?

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

According to liquidity preference theory, what shape is the money supply curve?

In a small open economy with perfect capital mobility, if the exchange rate is flexible, which of the following would be the effect of an expansionary monetary policy?

During recessions, how do automatic stabilizers tend to make the government's budget move?

Which of the following defines the government purchases multiplier?

What is the difference between monetary policy and fiscal policy?

Which of the following statements do opponents of active stabilization policy believe?

If there is excess money supply, what will people do and what happens to the interest rate?

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

An increase in the price level shifts the money demand curve to the left, making interest rates rise.

What do open-market sales do to the price level and real GDP?