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

Other things the same, an increase in the price level causes the real value of the dollar to fall in the market for foreign-currency exchange.

According to liquidity preference theory, if the quantity of money demanded is greater than the quantity supplied, then the interest rate will

During recessions, automatic stabilizers tend to make the government's budget

It is likely that a constitutional amendment that required the government always to run a balanced budget would

When the interest rate is above equilibrium, there is excess _____ of money. Households will _____ interest-earning assets, which _____ the interest rate.

If the multiplier is 3, then the MPC is

Assume that there is no accelerator affect. The MPC = 3/4. The government increases both expenditures and taxes by $600. The effect of taxes on aggregate demand is 3/4 the size of that created by government expenditures alone. The crowding out effect is 1/5 as strong as the combined effect of government expenditures and taxes on aggregate demand. How much does aggregate demand shift by?

Unemployment insurance and welfare programs work as automatic stabilizers.

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

If the Federal Reserve increases the money supply, then initially people want to

The Fed can influence the money supply by changing the interest rate it pays banks on the reserves they are holding.

An increase in taxes shifts the aggregate curve to the .

Which of the following Fed actions would both decrease the money supply?

Suppose the multiplier has a value that exceeds 1, and there are no crowding out or investment accelerator effects. Which of the following would shift aggregate demand to the right by more than the increase in expenditures?

Assume the MPC is 0.625. Assume there is a multiplier effect and that the total crowding-out effect is $12 billion. An increase in government purchases of $30 billion will shift aggregate demand to the

Which of the following policies would Keynes's followers support when an increase in business optimism shifts the aggregate demand curve away from long-run equilibrium?

According to a 2009 article in The Economist, the multiplier effect and crowding-out effect would exactly offset each other when the economy is

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

The idea that aggregate demand fluctuates due to irrational waves of pessimism by households and firms is known as _____.

If there is excess money supply, people will