Exam 24: The Influence of Monetary and Fiscal Policy on Aggregate Demand

Which of the following would not be an expected response from a decrease in the price level and so help to explain the slope of the aggregate-demand curve?

Other things the same, as the price level rises,

If households view a tax cut as temporary, then the tax cut

"Monetary policy can be described either in terms of the money supply or in terms of the interest rate." This statement amounts to the assertion that

According to classical macroeconomic theory,

Which U.S. president, when asked why he had proposed a tax cut, responded by saying "To stimulate the economy. Don't you remember your Economics 101?"

The theory of liquidity preference assumes that the nominal supply of money is determined by the

If, at some interest rate, the quantity of money supplied is less than the quantity of money demanded, people will desire to

"Monetary policy can be described either in terms of the money supply or in terms of the interest rate." This statement amounts to the assertion that

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

The short-run effects on the interest rate are

Who asserted that "the Federal Reserve's job is to take away the punch bowl just as the party gets going?"

Explain why the interest rate is the opportunity cost of holding currency. What is the benefit of holding currency?

A reduction in personal income taxes increases Aggregate Demand through

Other things the same, during recessions taxes tend to

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

If the interest rate decreases

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,

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?

If the stock market crashes, then