Exam 21: The Influence of Monetary and Fiscal Policy on Aggregate Demand

Which of the following policies would be advocated by someone who wants the government to follow an active stabilization policy when the economy is experiencing severe unemployment?

Imagine that the government increases its spending by $75 billion. Which of the following by itself would tend to make the change in aggregate demand different from $75 billion?

Which of the following shifts aggregate demand to the right?

Government purchases are said to have a

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

The Federal Funds rate is the interest rate

Policymakers use _____ policy and _____ policy to stabilize _____ and _____ in the short run.

According to the theory of liquidity preference,

Figure 34-4. On the figure, MS represents money supply and MD represents money demand. -Refer to Figure 34-4. Suppose the money-demand curve is currently MD2. If the current interest rate is r2, then

Opponents of active stabilization policy

The idea that aggregate demand fluctuates due to irrational waves of pessimism by households and firms is known as _____.

Monetary policy affects the economy with a long lag, in part because

In the short run,

The goal of monetary policy and fiscal policy is to

A European recession that reduces U.S. net exports by $50 billion may ultimately lead to a $_____ billion reduction in aggregate demand if the MPC is 0.75.

The marginal propensity to consume MPC) is defined as the fraction of

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 graphs apply to an economy such as the U.S. economy, then the slope of the AD curve is primarily attributable to the

Suppose there are both multiplier and crowding out effects but without any accelerator effects. An increase in government expenditures would definitely

An increase in the money supply decreases the interest rate in the short run.

Figure 34-7 -Refer to Figure 34-7. If the economy is at point b, a policy to restore full employment would be