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

Suppose that the MPC is 0.7,there is no investment accelerator,and there are no crowding-out effects.If government expenditures increase by $30 billion,then aggregate demand

The multiplier for changes in government spending is calculated as

If taxes

An decrease in taxes shifts aggregate demand

The government builds a new water-treatment plant.The owner of the company that builds the plant pays her workers.The workers increase their spending.Firms from which the workers buy goods increase their output.This type of effect on spending illustrates

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

Tax increases

An increase in government spending

Figure 34-6.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 34-6.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

In a certain economy,when income is $1000,consumer spending is $800.The value of the multiplier for this economy is 2.5.It follows that,when income is $1020,consumer spending is

Sometimes during wars,government expenditures are larger than normal.To reduce the effects this spending creates on interest rates,

Which of the following illustrates how the investment accelerator works?

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?

In a certain economy,when income is $500,consumer spending is $375.The value of the multiplier for this economy is 5.It follows that,when income is $510,consumer spending is

If the MPC is 3/5 then the multiplier is

If Congress increases taxes to balance the federal budget,then to prevent additional unemployment and a recession the Fed can

Which of the following events shifts the aggregate-demand curve leftward?

Assume the multiplier is 5 and that the crowding-out effect is $30 billion.An increase in government purchases of $20 billion will shift the aggregate-demand curve to the

Suppose the MPC is 0.9.There are no crowding out or investment accelerator effects.If the government increases its expenditures by $30 billion,then by how much does aggregate demand shift to the right? If the government decreases taxes by $30 billion,then by how far does aggregate demand shift to the right?

A significant 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