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

Figure 16-5. On the figure, MS represents money supply and MD represents money demand. -Refer to Figure 16-5. A shift of the money-demand curve from MD₁ to MD₂ could be a result of

What is the difference between monetary policy and fiscal policy?

Which of the following sequences best explains the negative slope of the aggregate-demand curve?

The primary argument against active monetary and fiscal policy is that

According to liquidity preference theory, a decrease in the price level causes the interest rate to

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 multiplier is 2.5, then the MPC is

If the Federal Reserve increases the money supply, then initially there is a

Assume the multiplier is 5 and that the crowding-out effect is $20 billion. An increase in government purchases of $10 billion will shift the aggregate-demand curve to the

During a recession unemployment benefits rise. This rise in benefits makes aggregate demand higher than otherwise.

Suppose the MPC is 0.9. There are no crowding out or investment accelerator effects. If the government increases its expenditures by $30 billion, then by how much does aggregate demand shift to the right? If the government decreases taxes by $30 billion, then by how far does aggregate demand shift to the right?

When Congress reduces spending in order to balance the government's budget, it needs to consider

When the interest rate increases, the opportunity cost of holding money

Which of the following policies would be advocated by someone who wants the government to follow an active stabilization policy when the economy is experiencing severe unemployment?

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. If the money-supply curve MS on the left-hand graph were to shift to the right, this would

The multiplier effect is exemplified by the multiplied impact on

Scenario 16-2. The following facts apply to a small, imaginary economy. • Consumption spending is $5,200 when income is $8,000. • Consumption spending is $5,536 when income is $8,400. -Refer to Scenario 16-2. In response to which of the following events could aggregate demand increase by $1,500?

People hold money primarily because it

Tax cuts

People will want to hold more money if the price level