Question 1

The government's choices regarding the overall level of government purchases and taxes is known as _____.

Accepted Answer

The answer of The government's choices regarding the overall level...

Question 2

If money demand shifted to the right and the Federal Reserve desired to return the interest rate to its original value, it could

Accepted Answer

A)  buy bonds to increase the money supply. 
B)  buy bonds to decrease the money supply. 
C)  sell bonds to increase the money supply. 
D)  sell bonds to decrease the money supply. 
A)  buy bonds to increase the money supply. 
B)  buy bonds to decrease the money supply. 
C)  sell bonds to increase the money supply. 
D)  sell bonds to decrease the money supply.

Question 3

In the short run, a decrease 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 4

The main criticism of those who doubt the ability of the government to respond in a useful way to the business cycle is that the theory by which money and government expenditures change output is flawed.

Accepted Answer

A) True 
 B)False

Question 5

The term crowding-out effect refers to

Accepted Answer

A)  the reduction in aggregate supply that results when a monetary expansion causes the interest rate to decrease. 
B)  the reduction in aggregate demand that results when a monetary expansion causes the interest rate to decrease. 
C)  the reduction in aggregate demand that results when a fiscal expansion causes the interest rate to increase. 
D)  the reduction in aggregate demand that results when a decrease in government spending or an increase in taxes causes the interest rate to increase. 
A)  the reduction in aggregate supply that results when a monetary expansion causes the interest rate to decrease. 
B)  the reduction in aggregate demand that results when a monetary expansion causes the interest rate to decrease. 
C)  the reduction in aggregate demand that results when a fiscal expansion causes the interest rate to increase. 
D)  the reduction in aggregate demand that results when a decrease in government spending or an increase in taxes causes the interest rate to increase.

Question 6

Figure 34-13  
Refer to Figure 34-13. The economy is currently at point A. Given the current situation, the Federal Reserve will _____ bonds, which causes interest rates to _____.

Accepted Answer

The answer of Figure 34-13  
Refer to Figure 34-13....

Question 7

Both monetary policy and fiscal policy affect aggregate demand.

Accepted Answer

A) True 
 B)False

Question 8

In order to simplify the equation for the multiplier to its familiar, relatively simple form, we make use of the

Accepted Answer

A)  assumption that increases in government purchases have no effect on consumer spending. 
B)  assumption that the feedback effects associated with changes in government purchases become negligible after two or three rounds of spending have occurred. 
C)  empirical evidence that points to a value of about 3/4 for the MPC. 
D)  fact that the multiplier effect is represented by an infinite geometric series. 
A)  assumption that increases in government purchases have no effect on consumer spending. 
B)  assumption that the feedback effects associated with changes in government purchases become negligible after two or three rounds of spending have occurred. 
C)  empirical evidence that points to a value of about 3/4 for the MPC. 
D)  fact that the multiplier effect is represented by an infinite geometric series.

Question 9

Scenario 34-1. Take the following information as given for a small, imaginary economy:
• When income is $10,000, consumption spending is $6,500.
• When income is $11,000, consumption spending is $7,250.
-Refer to Scenario 34-1. For this economy, an initial increase of $200 in net exports translates into an)

Accepted Answer

A)  $570 increase in aggregate demand when the crowding-out effect is taken into account. 
B)  $800 increase in aggregate demand when the crowding-out effect is taken into account. 
C)  $1,400 increase in aggregate demand in the absence of the crowding-out effect. 
D)  $800 increase in aggregate demand in the absence of the crowding-out effect. 
A)  $570 increase in aggregate demand when the crowding-out effect is taken into account. 
B)  $800 increase in aggregate demand when the crowding-out effect is taken into account. 
C)  $1,400 increase in aggregate demand in the absence of the crowding-out effect. 
D)  $800 increase in aggregate demand in the absence of the crowding-out effect.

Question 10

In the long run, the level of output

Accepted Answer

A)  depends on the money supply. 
B)  depends on the price level. 
C)  is determined by supply-side factors. 
D)  All of the above are correct. 
A)  depends on the money supply. 
B)  depends on the price level. 
C)  is determined by supply-side factors. 
D)  All of the above are correct.

Question 11

In recent years, the Federal Reserve has conducted policy by setting a target for the

Accepted Answer

A)  size of the money supply. 
B)  growth rate of the money supply. 
C)  federal funds rate. 
D)  discount rate. 
A)  size of the money supply. 
B)  growth rate of the money supply. 
C)  federal funds rate. 
D)  discount rate.

Question 12

An increase in government spending shifts aggregate demand

Accepted Answer

A)  to the right. The larger the multiplier is, the farther it shifts. 
B)  to the right. The larger the multiplier is, the less it shifts. 
C)  to the left. The larger the multiplier is, the farther it shifts. 
D)  to the left. The larger the multiplier is, the less it shifts. 
A)  to the right. The larger the multiplier is, the farther it shifts. 
B)  to the right. The larger the multiplier is, the less it shifts. 
C)  to the left. The larger the multiplier is, the farther it shifts. 
D)  to the left. The larger the multiplier is, the less it shifts.

Question 13

A 2009 article in The Economist noted that

Accepted Answer

A)  recent research has allowed economists to estimate the values of fiscal multipliers with a great deal of precision. 
B)  research on multipliers indicates that multipliers for permanent tax cuts tend to be smaller than multipliers for temporary tax cuts. 
C)  most of the evidence on multipliers for government spending is based on changes in military expenditures. 
D)  All of the above are correct. 
A)  recent research has allowed economists to estimate the values of fiscal multipliers with a great deal of precision. 
B)  research on multipliers indicates that multipliers for permanent tax cuts tend to be smaller than multipliers for temporary tax cuts. 
C)  most of the evidence on multipliers for government spending is based on changes in military expenditures. 
D)  All of the above are correct.

Question 14

Suppose there is an increase in government spending. To stabilize output, the Federal Reserve would

Accepted Answer

A)  increase government spending. 
B)  increase the money supply. 
C)  decrease government spending. 
D)  decrease the money supply. 
A)  increase government spending. 
B)  increase the money supply. 
C)  decrease government spending. 
D)  decrease the money supply.

Question 15

If the Federal Reserve's goal is to stabilize aggregate demand, then in response to an increase in money demand, the Federal Reserve will _____ the money supply.

Accepted Answer

The answer of If the Federal Reserve's goal is to...

Question 16

Automatic stabilizers

Accepted Answer

A)  increase the problems that lags cause in using fiscal policy as a stabilization tool. 
B)  are changes in taxes or government spending that increase aggregate demand without requiring policy makers to act when the economy goes into recession. 
C)  are changes in taxes or government spending that policy makers quickly agree to when the economy goes into recession. 
D)  All of the above are correct. 
A)  increase the problems that lags cause in using fiscal policy as a stabilization tool. 
B)  are changes in taxes or government spending that increase aggregate demand without requiring policy makers to act when the economy goes into recession. 
C)  are changes in taxes or government spending that policy makers quickly agree to when the economy goes into recession. 
D)  All of the above are correct.

Question 17

The interest rate falls if

Accepted Answer

A)  the price level falls or the money supply falls. 
B)  the price level falls or the money supply rises. 
C)  the price level rises or the money supply falls. 
D)  the price level rises or the money supply rises. 
A)  the price level falls or the money supply falls. 
B)  the price level falls or the money supply rises. 
C)  the price level rises or the money supply falls. 
D)  the price level rises or the money supply rises.

Question 18

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. As we move from one point to another along the money-demand curve MD1,

Accepted Answer

A)  the price level is held fixed at P1. 
B)  the interest rate is held fixed at r1. 
C)  the money supply is changing so as to keep the money market in equilibrium. 
D)  the expected inflation rate is changing so as to keep the real interest rate constant. 
A)  the price level is held fixed at P1. 
B)  the interest rate is held fixed at r1. 
C)  the money supply is changing so as to keep the money market in equilibrium. 
D)  the expected inflation rate is changing so as to keep the real interest rate constant.

Question 19

Changes in the interest rate

Accepted Answer

A)  shift aggregate demand whether they are caused by changes in the price level or by changes in fiscal or monetary policy. 
B)  shift aggregate demand if they are caused by changes in the price level, but not if they are caused by changes in fiscal or monetary policy. 
C)  shift aggregate demand if they are caused by fiscal or monetary policy, but not if they are caused by changes in the price level. 
D)  do not shift aggregate demand. 
A)  shift aggregate demand whether they are caused by changes in the price level or by changes in fiscal or monetary policy. 
B)  shift aggregate demand if they are caused by changes in the price level, but not if they are caused by changes in fiscal or monetary policy. 
C)  shift aggregate demand if they are caused by fiscal or monetary policy, but not if they are caused by changes in the price level. 
D)  do not shift aggregate demand.

Question 20

A tax increase has

Accepted Answer

A)  a multiplier effect but not a crowding out effect 
B)  a crowding out effect but not a multiplier effect 
C)  both a crowding out and multiplier effect 
D)  neither a multiplier or crowding out effect 
A)  a multiplier effect but not a crowding out effect 
B)  a crowding out effect but not a multiplier effect 
C)  both a crowding out and multiplier effect 
D)  neither a multiplier or crowding out effect

The government's choices regarding the overall level of government purchases and taxes is known as _____.

If money demand shifted to the right and the Federal Reserve desired to return the interest rate to its original value, it could

In the short run, a decrease in the money supply causes interest rates to

The main criticism of those who doubt the ability of the government to respond in a useful way to the business cycle is that the theory by which money and government expenditures change output is flawed.

The term crowding-out effect refers to

Figure 34-13 Refer to Figure 34-13. The economy is currently at point A. Given the current situation, the Federal Reserve will _ bonds, which causes interest rates to _.

Both monetary policy and fiscal policy affect aggregate demand.

In order to simplify the equation for the multiplier to its familiar, relatively simple form, we make use of the

In the long run, the level of output

In recent years, the Federal Reserve has conducted policy by setting a target for the

An increase in government spending shifts aggregate demand

A 2009 article in The Economist noted that

Suppose there is an increase in government spending. To stabilize output, the Federal Reserve would

If the Federal Reserve's goal is to stabilize aggregate demand, then in response to an increase in money demand, the Federal Reserve will _____ the money supply.

Automatic stabilizers

The interest rate falls if

Changes in the interest rate

A tax increase has

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

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

The government's choices regarding the overall level of government purchases and taxes is known as _____.

If money demand shifted to the right and the Federal Reserve desired to return the interest rate to its original value, it could

In the short run, a decrease in the money supply causes interest rates to

The main criticism of those who doubt the ability of the government to respond in a useful way to the business cycle is that the theory by which money and government expenditures change output is flawed.

The term crowding-out effect refers to

Figure 34-13 Refer to Figure 34-13. The economy is currently at point A. Given the current situation, the Federal Reserve will _____ bonds, which causes interest rates to _____.

Both monetary policy and fiscal policy affect aggregate demand.

In order to simplify the equation for the multiplier to its familiar, relatively simple form, we make use of the

In the long run, the level of output

In recent years, the Federal Reserve has conducted policy by setting a target for the

An increase in government spending shifts aggregate demand

A 2009 article in The Economist noted that

Suppose there is an increase in government spending. To stabilize output, the Federal Reserve would

If the Federal Reserve's goal is to stabilize aggregate demand, then in response to an increase in money demand, the Federal Reserve will _____ the money supply.

Automatic stabilizers

The interest rate falls if

Changes in the interest rate

A tax increase has

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

Figure 34-13 Refer to Figure 34-13. The economy is currently at point A. Given the current situation, the Federal Reserve will _ bonds, which causes interest rates to _.