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

Which of the following tends to make aggregate demand shift further to the right than the amount by which government expenditures increase?

Other things equal, the higher the price level, the higher is the real wealth of households.

are changes in fiscal policy that stimulate aggregate demand when the economy goes into recession without policymakers having to take any deliberate action.

The short-run effects on the interest rate are

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?

During recessions, automatic stabilizers tend to make the government's budget

Supply-side economists focus more than other economists on

According to the theory of liquidity preference, money demand

The positive feedback from aggregate demand to investment is called

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

Liquidity preference refers directly to Keynes' theory concerning

An implication of the Employment Act of 1946 is that the government should respond to changes in the private economy to stabilize aggregate demand.

If the MPC is 3/5 then the multiplier is

For the U.S. economy, which of the following helps explain the slope of the aggregate-demand curve?

If there is excess demand for money, then people will

Which of the following is an example of an increase in government purchases?

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

According to liquidity preference theory,

If businesses and consumers become pessimistic, the Federal Reserve can attempt to reduce the impact on the price level and real GDP by