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

Which of the following is the most likely effect of an increase in government spending on goods to build or repair infrastructure?

How does the multiplier change when the MPC increases, and what is the effect on aggregate demand?

Which of the following shifts aggregate demand to the left?

When a central bank sets a target for the interest rate, it commits itself to which of the following?

If the Bank of Canada chooses to prevent any change in the exchange rate when government spending increases, which of the following is most likely to happen?

If the interest rate is below a central bank's target, what should the central bank do?

How do tax cuts and government expenditure affect aggregate demand?

If the MPC is 0.75 and there are no crowding-out or accelerator effects, an initial increase in AD of $200 billion will eventually shift the AD curve to the right by how much?

For Canada, the most important reason for the downward slope of the aggregate demand curve is the real exchange-rate effect.

When the Bank of Canada buys government bonds, how do the reserves of the banking system change and what happens to the money supply?

Which of the following terms refers to the reduction in demand that results when a fiscal expansion raises the interest rate?

Which of the following lists of events is consistent with the long-run and short-run economic theories studied?

Which of the following policy alternatives would be an appropriate response to an increase in investment demand by a government that wants to stabilize output?

Which of the following is NOT a response that would result from a decrease in the price level and so help to explain the slope of the aggregate demand curve?

Most economists believe that a cut in tax rates will do which of the following?

According to liquidity preference theory, if the quantity of money supplied is greater than the quantity demanded, what will happen to the interest rate and the quantity of money demanded?

Which of the following policies would stabilization policy activists support when the economy is experiencing unemployment above the natural rate?

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

If there are automatic stabilizers but no deliberate action by policymakers, how would government expenditures change as output changes?

How does the interest rate change when the price level falls and when the money supply falls?