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

Figure 34-2.On the left-hand graph,MS represents the supply of money and MD represents the demand for money;on the right-hand graph,AD represents aggregate demand.The usual quantities are measured along the axes of both graphs. -Refer to Figure 34-2.If the money-supply curve MS on the left-hand graph were to shift to the right,this would

The price of imported oil rises.If the government wanted to stabilize output,which of the following could it do?

When the Fed sells government bonds,the reserves of the banking system

Critics of stabilization policy argue that

The government builds a new water-treatment plant.The owner of the company that builds the plant pays her workers.The workers increase their spending.Firms from which the workers buy goods increase their output.This type of effect on spending illustrates

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.

Suppose that the MPC is 0.60;there is no investment accelerator;and there are no crowding-out effects.If government expenditures increase by $25 billion,then aggregate demand

If,at some interest rate,the quantity of money supplied is greater than the quantity of money demanded,people will desire to

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

Figure 34-1 -Refer to Figure 34-1.If the current interest rate is 2 percent,

According to the theory of liquidity preference,

Figure 34-2.On the left-hand graph,MS represents the supply of money and MD represents the demand for money;on the right-hand graph,AD represents aggregate demand.The usual quantities are measured along the axes of both graphs. -Refer to Figure 34-2.What does Y represent on the horizontal axis of the right-hand graph?

People are likely to want to hold more money if the interest rate

Open-market purchases

In which of the following cases would the quantity of money demanded be smallest?

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

Figure 34-5.On the left-hand graph,MS represents the supply of money and MD represents the demand for money;on the right-hand graph,AD represents aggregate demand.The usual quantities are measured along the axes of both graphs. -Refer to Figure 34-5.Suppose the multiplier is 5 and the government increases its purchases by $10 billion.Also,suppose the AD curve would shift from AD₁ to AD₂ if there were no crowding out;the AD curve actually shifts from AD₁ to AD₃ with crowding out.Also,suppose the horizontal distance between the curves AD₁ and AD₃ is $20 billion.The extent of crowding out,for any particular level of the price level,is

If there is excess demand for money,then people will

The theory of liquidity preference illustrates the principle that

During recessions,taxes tend to