Exam 21: The Influences of Monetary and Fiscal Policy on Aggregate Demand: How Fiscal Policy Influences Aggregate Demand

If the MPC is 0.8 and there are no crowding-out or accelerator effects,then an initial increase in aggregate demand of $120 billion will eventually shift the aggregate demand curve to the right by

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

Which of the following correctly explains the crowding-out effect?

Scenario 34-2.The following facts apply to a small,imaginary economy. • Consumption spending is $6,720 when income is $8,000. • Consumption spending is $7,040 when income is $8,500. -Refer to Scenario 34-2.The multiplier for this economy is

The positive feedback from aggregate demand to investment is called

Initially,the economy is in long-run equilibrium.The aggregate demand curve then shifts $50 billion to the left.The government wants to change its spending to offset this decrease in demand.The MPC is 0.80.Suppose the effect on aggregate demand from a change in taxes is 4/5 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 aggregate demand?

In the long run,fiscal policy influences

Assume the MPC is 0.625.Assume there is a multiplier effect and that the total crowding-out effect is $12 billion.An increase in government purchases of $30 billion will shift aggregate demand to the

If the multiplier is 3,then the MPC is

Figure 34-5.On the figure,MS represents money supply and MD represents money demand. -Refer to Figure 34-5.A shift of the money-demand curve from MD₁ to MD₂ could be a result of

Which of the following policy actions shifts the aggregate-demand curve?

If the investment accelerator from an increase in government purchases is larger than the crowding-out effect,then

A decrease in government spending initially and primarily shifts

If net exports fall $40 billion,the MPC is 9/11,and there is a multiplier effect but no crowding out and no investment accelerator,then

The idea that expansionary fiscal policy has a positive affect on investment is known as

Scenario 34-2.The following facts apply to a small,imaginary economy. • Consumption spending is $6,720 when income is $8,000. • Consumption spending is $7,040 when income is $8,500. -Refer to Scenario 34-2.In response to which of the following events could aggregate demand increase by $1,500?

The multiplier effect states that there are additional shifts in aggregate demand from fiscal policy,because it

Scenario 34-1.Take the following information as given for a small,imaginary economy: • When income is $10,000,consumption spending is $6,500. • When income is $11,000,consumption spending is $7,250. -Refer to Scenario 34-1.The multiplier for this economy is

A decrease in government spending

Supply-side economists focus more than other economists on