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

Initially,the economy is in long-run equilibrium.The aggregate demand curve then shifts $40 billion to the left.The government wants to change its spending to offset this decrease in demand.The MPC is 0.60.Suppose the effect on aggregate demand from a change in taxes is 3/5 the size of the change from government expenditures.There is no crowding out and no accelerator effect.What should the government do if it wants to offset the decrease in real GDP?

The process of the investment accelerator involves

Which among the following assets is the most liquid?

The positive feedback from aggregate demand to investment is called

Which of the following Fed actions would both increase the money supply?

The theory of liquidity preference illustrates the principle that

In the short run,an increase in the money supply causes interest rates to

According to liquidity preference theory,if the quantity of money demanded is greater than the quantity supplied,then the interest rate will

In which of the following cases does the aggregate-demand curve shift to the right?

If businesses and consumers become pessimistic,the Federal Reserve can attempt to reduce the impact on the price level and real GDP by

If the Federal Reserve decided to lower interest rates,it could

Other things the same,which of the following happens if the price level falls?

Which of the following events shifts aggregate demand rightward?

Which of the following sequences best explains the negative slope of the aggregate-demand curve?

While a television news reporter might state that "Today the Fed lowered the federal funds rate from 5.5 percent to 5.25 percent," a more precise account of the Fed's action would be as follows:

Which of the following sequences best represents the crowding-out effect?

If the MPC = 3/5,then the government purchases multiplier is

Which of the following events would shift money demand to the left?

Stock prices often rise when the Fed raises interest rates.

Which of the following are effects of an increase in government spending financed by a tax increase?