Exam 24: The Influence of Monetary and Fiscal Policy on Aggregate Demand

Figure 24-4.On the figure,MS represents money supply and MD represents money demand. -Refer to Figure 24-4.Suppose the current equilibrium interest rate is r₃.Let Y₃ represent the corresponding quantity of goods and services demanded,and let P₃ represent the corresponding price level.Starting from this situation,if the Federal Reserve decreases the money supply and if the price level remains at P₃,then

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

Which of the following statements is correct?

If the inflation rate is zero,then the nominal and real interest rate are the same.

Unemployment insurance and welfare programs work as automatic stabilizers.

Assume the multiplier is 5 and that the crowding-out effect is $20 billion.An increase in government purchases of $10 billion will shift the aggregate-demand curve to the

Suppose the multiplier has a value that exceeds 1,and there are no crowding out or investment accelerator effects.Which of the following would shift aggregate demand to the right by more than the increase in expenditures?

According to the liquidity preference theory,an increase in the overall price level of 10 percent

The Federal Funds rate is the interest rate

According to liquidity preference theory,if there were a shortage of money,then

The multiplier for changes in government spending is calculated as

Figure 24-2.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 24-2.Assume the money market is always in equilibrium.Under the assumptions of the model,

If the Fed conducts open-market purchases,the money supply

Assuming no crowding-out,investment-accelerator,or multiplier effects,a $100 billion increase in government expenditures shifts aggregate demand

If money demand shifted to the right and the Federal Reserve desired to return the interest rate to its original value,it could

Figure 24-2.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 24-2.As we move from one point to another along the money-demand curve MD₁,

A policy that results in slow and steady growth of the money supply is an example of

Figure 24-4.On the figure,MS represents money supply and MD represents money demand. -Refer to Figure 24-4.Suppose the current equilibrium interest rate is r₁.Which of the following events would cause the equilibrium interest rate to increase?

If the Fed conducts open-market sales,which of the following quantities increase(s)?

If the multiplier is 6 and if there is no crowding-out effect,then a $60 billion increase in government expenditures causes aggregate demand to