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

Which of the effects listed below increases the quantity of goods and services demanded when the price level falls and decreases the quantity of goods and services demanded when the price level rises?

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?

A decrease in government spending initially and primarily shifts

Critics of stabilization policy argue that

Policymakers use _____ policy and _____ policy to stabilize _____ and _____ in the short run.

Figure 34-2. 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 34-2. Assume the money market is always in equilibrium. Under the assumptions of the model,

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

Figure 34-8 -Refer to Figure 34-8. An increase in government purchases will

To offset increased pessimism by households, the government may _____ government spending and/or _____ taxes.

Liquidity preference theory is most relevant to the

Figure 34-1 -Refer to Figure 34-1. There is an excess demand for money at an interest rate of

Figure 34-3 -Refer to Figure 34-3. For an economy such as the United States, what component of the demand for goods and services is most responsible for the decrease in output from Y1 to Y2?

Opponents of active stabilization policy

According to liquidity preference theory, if the price level increases, then the equilibrium interest rate

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

Government purchases are said to have a

Which of the following actions might we logically expect to result from rising stock prices?

According to the theory of liquidity preference,

If the government cuts the tax rate, workers get to keep

Sometimes, changes in monetary policy and/or fiscal policy are intended to offset changes to aggregate demand over which policymakers have little or no control.