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

A significant example of a temporary tax cut was the one announced in 1992 by President George H. W. Bush. The effect of that tax cut on consumer spending and aggregate demand was

An aide to a U.S. Congressman computes the effect on aggregate demand of a $20 billion tax cut. The actual increase in aggregate demand is less than the aide expected. Which of the following errors in the aide's computation would be consistent with an overestimation of the impact on aggregate demand?

According to the Theory of Liquidity Preference, a fall in the _____ reduces the amount of money that people wish to hold. As a result, falling interest rates stimulates investment spending and aggregate _____.

In the early 1960s, the Kennedy administration made considerable use of

To reduce aggregate demand, the government may reduce or increase .

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

In which of the following cases would the quantity of money demanded be largest?

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

Depending on the size of the multiplier and crowding-out effects, the rightward shift in aggregate demand from a tax cut could be larger or smaller than the tax cut.

Which among the following assets is the most liquid?

Figure 34-4. On the figure, MS represents money supply and MD represents money demand. -Refer to Figure 34-4. Which of the following events could explain a shift of the money-demand curve from MD1 to MD2?

Which of the following illustrates how the investment accelerator works?

When there is an excess demand for money, households will interest-bearing bonds, causing interest rates to _____.

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

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

According to the theory of liquidity preference, if the interest rate rises

Macroeconomic forecasts are

Supply-side economists believe that a reduction in the tax rate

Figure 34-12 -Refer to Figure 34-12. Suppose the multiplier is 5 and the economy is currently at point A. To stabilize output at $1000, the government should _____ purchases by $_____.

Which of the following properly describes the interest-rate effect?