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

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 marginal propensity to consume for this economy is

The process of the investment accelerator involves

Assume the MPC is 0.8.Assuming only the multiplier effect matters,a decrease in government purchases of $100 billion will shift the aggregate demand curve to the

In 2009 President Obama and Congress increased government spending.Some economists thought this increase would have little effect on output.Which of the following would make the effect of an increase in government expenditures on aggregate demand smaller?

If the marginal propensity to consume is 0.75,and there is no investment accelerator or crowding out,a $15 billion increase in government expenditures would shift the aggregate demand curve right by

An increase in government purchases is likely to

Assuming no crowding-out,investment-accelerator,or multiplier effects,a $100 billion increase in government expenditures shifts aggregate demand

Which of the following is an example of an increase in government purchases?

An aide to a U.S.Congressman computes the effect on aggregate demand of a $20 billion tax cut.The actual increase in aggregate demand is less than the aide expected.Which of the following errors in the aide's computation would be consistent with an overestimation of the impact on aggregate demand?

If the multiplier is 6 and if there is no crowding-out effect,then a $60 billion increase in government expenditures causes aggregate demand to

If the multiplier is 5.25,then the MPC is

A tax increase has

As real GDP falls,

Figure 34-8 -Refer to Figure 34-8.An increase in taxes will

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 multiplier is 5 and the government increases its purchases by $15 billion.Also,suppose the AD curve would shift from AD₁ to AD₂ if there were no crowding out;the AD curve actually shifts from AD₁ to AD₃ with crowding out.Also,suppose the horizontal distance between the curves AD₁ and AD₃ is $55 billion.The extent of crowding out,for any particular level of the price level,is

Which of the following events shifts aggregate demand rightward?

Suppose there are both multiplier and crowding out effects but without any accelerator effects.An increase in government expenditures would

If the MPC = 0.75,then the government purchases multiplier is about

Which of the following tends to make the size of a shift in aggregate demand resulting from an increase in government purchases smaller than it otherwise would be?

The marginal propensity to consume (MPC)is defined as the fraction of