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

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.If the graphs apply to an economy such as the U.S.economy,then the slope of the AD curve is primarily attributable to the

Which of the following properly describes the interest-rate effect?

To decrease the interest rate the Federal Reserve could

During recessions,taxes tend to

Which among the following assets is the most liquid?

Opponents of active stabilization policy

Figure 24-6.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 24-6.Suppose the graphs are drawn to show the effects of an increase in government purchases.If it were not for the increase in r from r₁ to r₂,then

If the price level falls,then

Suppose that consumers become pessimistic about the future health of the economy.What will happen to aggregate demand and to output? What might the president and Congress have to do to keep output stable?

According to liquidity preference theory,the slope of the money demand curve is explained as follows:

According to John Maynard Keynes,

What is the difference between monetary policy and fiscal policy?

Paul Samuelson,a famous economist,said that

Scenario 24-1.Take the following information as given for a small,imaginary economy: -Refer to Scenario 24-1.The multiplier for this economy is

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.If the money-supply curve MS on the left-hand graph were to shift to the right,this would

In a certain economy,when income is $400,consumer spending is $350.The value of the multiplier for this economy is 3.125.It follows that,when income is $450,consumer spending is

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.Which of the following quantities is held constant as we move from one point to another on either graph?

An increase in the U.S.interest rate

The multiplier is computed as MPC / (1 - MPC).

According to liquidity preference theory,an increase in money demand for some reason other than a change in the price level causes