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

Figure 16-3. -Refer to Figure 16-3. Which of the following sequences (numbered arrows) shows the logic of the interest-rate effect?

Automatic stabilizers

Other things the same, which of the following responses would we expect from an increase in U.S. interest rates?

The interest rate that the Federal Reserve pays banks on the reserves they hold is called the

Which of the following statements is correct for the short run?

Some economists argue that

According to liquidity preference theory,

If the price level falls, then

Suppose foreigners find U.S. goods and services more desirable for some reason other than a change in the exchange rate. Which policies could be used to offset the resulting change in output?

Both the multiplier effect and the investment accelerator tend to make the aggregate-demand curve shift further than it does due to an initial increase in government expenditures.

The wealth effect stems from the idea that a higher price level

Assume the MPC is 0.75. Assume there is a multiplier effect and that the total crowding-out effect is $6 billion. An increase in government purchases of $10 billion will shift aggregate demand to the

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

The opportunity cost of holding money

A 2009 article in The Economist noted that

If the marginal propensity to consume is 4/5, then a decrease in government spending of $1 billion decreases the demand for goods and services by $5 billion.

Liquidity preference refers directly to Keynes' theory concerning

Which particular interest rate(s) do we attempt to explain using the theory of liquidity preference?

People might deposit more money into interest-bearing accounts,

The exchange-rate effect is based, in part, on the idea that