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

Assume the MPC is 0.75.Assuming only the multiplier effect matters,a decrease in government purchases of $100 billion will shift the aggregate demand curve to the

For the U.S.economy,which of the following is the most important reason for the downward slope of the aggregate-demand curve?

An implication of the Employment Act of 1946 is that the government should respond to changes in the private economy to stabilize aggregate demand.

Which of the following statements generates the greatest amount of disagreement among economists?

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.Assume the money market is always in equilibrium,and suppose r₁ = 0.08;r₂ = 0.12;Y₁ = 13,000;Y₂ = 10,000;P₁ = 1.0;and P₂ = 1.2.Which of the following statements is correct? When P = P₂,

The most important automatic stabilizer is

Which particular interest rate(s)do we attempt to explain using the theory of liquidity preference?

If the price level falls,then

Suppose aggregate demand shifts to the left and policymakers want to stabilize output.What can they do?

The Fed is concerned about stock market booms because the booms

The multiplier for changes in government spending is calculated as

The most extreme example of a temporary tax cut was the one announced in 1992 by President George H.W.Bush.The effect of that tax cut on consumer spending and aggregate demand was

The interest rate would fall and the quantity of money demanded would

The theory of liquidity preference was developed by Irving Fisher.

Using the liquidity-preference model,when the Federal Reserve increases the money supply,

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.As we move from one point to another along the money-demand curve MD₁,

Both the multiplier effect and the investment accelerator tend to make the aggregate-demand curve shift further than it does due to an initial increase in government expenditures.

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

In the early 1960s,the Kennedy administration made considerable use of

Keynes used the term "animal spirits" to refer to