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

If the stock market booms, then

For the U.S. economy, money holdings are a

The theory of liquidity preference is largely at odds with the basic ideas of supply and demand.

According to liquidity preference theory, the opportunity cost of holding money is

A severe problem that many economists have with the active use of monetary policy and fiscal policy to stabilize the economy is that, while those policies obviously work well in practice, they are not well understood on a theoretical level.

The Fed is concerned about stock market booms because the booms

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

If the Fed conducts open-market purchases, the money supply

Other things equal, in the short run a higher price level leads households to

When the Fed lowers the growth rate of the money supply, it must take into account

A decrease in the interest rate could have been caused by the money-demand curve shifting

Which of the following events would shift money demand to the left?

Unemployment insurance and welfare programs work as automatic stabilizers.

The lag problem associated with monetary policy is due mostly to

A policy that results in slow and steady growth of the money supply is an example of

Which of the following is not a reason the aggregate-demand curve slopes downward? As the price level increases,