Exam 16: The Influence of Monetary and Fiscal Policy on Aggregate Demand

Figure 16-2. 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 16-2. What does Y represent on the horizontal axis of the right-hand graph?

According to liquidity preference theory, investment spending would rise if the price level

The change in aggregate demand that results from fiscal expansion changing the interest rate is called the

Charisse is of the opinion that the interest rate depends on the economy's saving propensities and investment opportunities. Most economists would say that Charisse's opinion is

When the interest rate is above the equilibrium level,

In the early 1960s, the Kennedy administration made considerable use of

During the economic downturn of 2008-2009, the Federal Reserve

Figure 16-2. 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 16-2. Which of the following quantities is held constant as we move from one point to another on either graph?

Scenario 16-1. Take the following information as given for a small, imaginary economy: -Refer to Scenario 16-1. The marginal propensity to consume for this economy is

Which of the following is not an automatic stabilizer?

Figure 16-4. On the figure, MS represents money supply and MD represents money demand. -Refer to Figure 16-4. Suppose the money-demand curve is currently MD₂. If the current interest rate is r₂, then

Most economists believe that fiscal policy

According to liquidity preference theory, the money-supply curve is

Which of the following policy alternatives would be an appropriate response to a sharp increase in investment spending, assuming policymakers want to stabilize output?

During periods of expansion, automatic stabilizers cause government expenditures

An increase in government spending on goods to build or repair infrastructure

Figure 16-4. On the figure, MS represents money supply and MD represents money demand. -Refer to Figure 16-4. Suppose the money-demand curve is currently MD₁. If the current interest rate is r₂, then

Figure 16-2. 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 16-2. A decrease in Y from Y₁ to Y₂ is explained as follows:

To decrease the interest rate the Federal Reserve could

There is an increase in government expenditures financed by taxes and its overall short-run effect on output is larger than the change in government spending. Which of the following is correct?