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

An increase in the price level shifts the money demand curve to the left, causing interest rates to increase.

Which of the following statements is correct?

Suppose aggregate demand shifts to the left and policymakers want to stabilize output. What can they do?

Critics of stabilization policy argue that monetary and fiscal policies affect the economy with .

The interest-rate effect is partially explained by the fact that a higher price level reduces money demand.

If Congress increases taxes to balance the federal budget, then to prevent unemployment and a recession the Fed will

If the multiplier is 5.25, then the MPC is

Suppose that there are no crowding-out effects and the MPC is .9. By how much must the government increase expenditures to shift the aggregate demand curve right by $10 billion?

Which among the following assets is the most liquid?

According to liquidity preference theory, the money-supply curve would shift if the Fed

If the marginal propensity to consume is 6/7, then the multiplier is 7.

The theory of liquidity preference was developed by Irving Fisher.

Assume the multiplier is 5 and that the crowding-out effect is $30 billion. An increase in government purchases of $20 billion will shift the aggregate-demand curve to the

Monetary policy and fiscal policy influence

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

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

The Employment Act of 1946 states that

While a television news reporter might state that "Today the Fed raised the federal funds rate from 1 percent to 1)25 percent," a more precise account of the Fed's action would be as follows:

If businesses and consumers become pessimistic, the Federal Reserve can attempt to reduce the impact on the price level and real GDP by

For the most part, fiscal policy affects the economy in the short run while monetary policy primarily matters in the long run.