Question 1

In the short run, an increase in the money supply causes interest rates to

Accepted Answer

A)  increase, and aggregate demand to shift right. 
B)  increase, and aggregate demand to shift left. 
C)  decrease, and aggregate demand to shift right. 
D)  decrease, and aggregate demand to shift left. 
A)  increase, and aggregate demand to shift right. 
B)  increase, and aggregate demand to shift left. 
C)  decrease, and aggregate demand to shift right. 
D)  decrease, and aggregate demand to shift left.

Question 2

Figure 34-9  
-Refer to Figure 34-9. Suppose the economy is currently at point A. To restore full employment, the Federal Reserve should

Accepted Answer

A)  purchase government bonds, which will increase the money supply. 
B)  purchase government bonds, which will reduce the money supply. 
C)  sell government bonds, which will increase the money supply. 
D)  sell government bonds, which will reduce the money supply. 
A)  purchase government bonds, which will increase the money supply. 
B)  purchase government bonds, which will reduce the money supply. 
C)  sell government bonds, which will increase the money supply. 
D)  sell government bonds, which will reduce the money supply.

Question 3

According to liquidity preference theory, an increase in the price level shifts the

Accepted Answer

A)  money demand curve rightward, so the interest rate increases. 
B)  money demand curve rightward, so the interest rate decreases. 
C)  money demand curve leftward, so the interest rate decreases. 
D)  money demand curve leftward, so the interest rate increases. 
A)  money demand curve rightward, so the interest rate increases. 
B)  money demand curve rightward, so the interest rate decreases. 
C)  money demand curve leftward, so the interest rate decreases. 
D)  money demand curve leftward, so the interest rate increases.

Question 4

An essential piece of the liquidity preference theory is the demand for money.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A)  represent an action taken by the Federal Reserve. 
B)  shift the AD curve to the left. 
C)  create, until the interest rate adjusted, an excess demand for money at the interest rate that equilibrated the money market before the shift. 
D)  All of the above are correct. 
A)  represent an action taken by the Federal Reserve. 
B)  shift the AD curve to the left. 
C)  create, until the interest rate adjusted, an excess demand for money at the interest rate that equilibrated the money market before the shift. 
D)  All of the above are correct.

Question 6

In recent years, the Fed has chosen to target interest rates rather than the money supply because

Accepted Answer

A)  Congress passed a law requiring them to do so. 
B)  the President requested them to do so. 
C)  the money supply is hard to measure with sufficient precision. 
D)  changes in the interest rate change aggregate demand, but changes in the money supply do not. 
A)  Congress passed a law requiring them to do so. 
B)  the President requested them to do so. 
C)  the money supply is hard to measure with sufficient precision. 
D)  changes in the interest rate change aggregate demand, but changes in the money supply do not.

Question 7

Most economists believe that fiscal policy

Accepted Answer

A)  only affects aggregate demand and not aggregate supply. 
B)  primarily affects aggregate demand. 
C)  primarily effects aggregate supply. 
D)  only affects aggregate supply and not aggregate demand. 
A)  only affects aggregate demand and not aggregate supply. 
B)  primarily affects aggregate demand. 
C)  primarily effects aggregate supply. 
D)  only affects aggregate supply and not aggregate demand.

Question 8

In a certain economy, when income is $100, consumer spending is $60. The value of the multiplier for this economy is 4. It follows that, when income is $101, consumer spending is

Accepted Answer

A)  $60.25. 
B)  $60.75. 
C)  $61.33. 
D)  $64.00. 
A)  $60.25. 
B)  $60.75. 
C)  $61.33. 
D)  $64.00.

Question 9

During recessions, the government tends to run a budget deficit.

Accepted Answer

A) True 
 B)False

Question 10

The multiplier for changes in government spending is calculated as

Accepted Answer

A)  1/1+MP
C) . 
B)  1 - MP
C) /MPC. 
C)  1/MPC. 
D)  1/1 - MP
C) . 
A)  1/1+MP
C) . 
B)  1 - MP
C) /MPC. 
C)  1/MPC. 
D)  1/1 - MP
C) .

In the short run, an increase in the money supply causes interest rates to

Figure 34-9 -Refer to Figure 34-9. Suppose the economy is currently at point A. To restore full employment, the Federal Reserve should

According to liquidity preference theory, an increase in the price level shifts the

An essential piece of the liquidity preference theory is the demand for money.

In recent years, the Fed has chosen to target interest rates rather than the money supply because

Most economists believe that fiscal policy

In a certain economy, when income is $100, consumer spending is $60. The value of the multiplier for this economy is 4. It follows that, when income is $101, consumer spending is

During recessions, the government tends to run a budget deficit.

The multiplier for changes in government spending is calculated as

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Short-Run Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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

In the short run, an increase in the money supply causes interest rates to

Figure 34-9 -Refer to Figure 34-9. Suppose the economy is currently at point A. To restore full employment, the Federal Reserve should

According to liquidity preference theory, an increase in the price level shifts the

An essential piece of the liquidity preference theory is the demand for money.

In recent years, the Fed has chosen to target interest rates rather than the money supply because

Most economists believe that fiscal policy

In a certain economy, when income is $100, consumer spending is $60. The value of the multiplier for this economy is 4. It follows that, when income is $101, consumer spending is

During recessions, the government tends to run a budget deficit.

The multiplier for changes in government spending is calculated as

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Short-Run Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters