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

Assume the following. • The MPC has a value of 0.8. • The relationship between the interest rate,r,and investment,I,is given by the Equation, , Where b is a positive constant. • Government purchases,G,are increased by $1,000. In which of the following cases would there be no crowding out?

The multiplier effect is exemplified by the multiplied impact on

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 MD₂ to MD₁ is consistent with which of the following sets of events?

Assume that there is no accelerator affect.The MPC = 3/4.The government increases both expenditures and taxes by $600.The effect of taxes on aggregate demand is 3/4 the size of that created by government expenditures alone.The crowding out effect is 1/5 as strong as the combined effect of government expenditures and taxes on aggregate demand.How much does aggregate demand shift by?

Government purchases are said to have a

A tax cut shifts aggregate demand

Which of the following tends to make aggregate demand shift further to the right than the amount by which government expenditures increase?

The term crowding-out effect refers to

When taxes increase,interest rates​

Most economists believe that a cut in tax rates

In order to simplify the equation for the multiplier to its familiar,relatively simple form,we make use of the

An increase in government spending initially and primarily shifts

Which of the following is an example of crowding out?

Fiscal policy refers to the idea that aggregate demand is affected by changes in

Suppose the MPC is 0.60.Assume there are no crowding out or investment accelerator effects.If the government increases expenditures by $200 billion,then by how much does aggregate demand shift to the right? If the government decreases taxes by $200 billion,then by how much does aggregate demand shift to the right?

If the MPC = 4/5,then the government purchases multiplier is

As the MPC gets close to 1,the value of the multiplier approaches

The logic of the multiplier effect applies

Figure 34-5.On the figure,MS represents money supply and MD represents money demand. -Refer to Figure 34-5.What is measured along the vertical axis of the graph?

A tax cut shifts the aggregate demand curve the farthest if