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

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

Which of the following policy actions shifts the aggregate-demand curve?

If taxes

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

Which of the following correctly explains the crowding-out effect?

How does a reduction in the money supply by the Fed make owning stocks less attractive?

A decrease in government spending

If the price level rises, then

Most economists believe that fiscal policy

An open-market purchase by the Federal Reserve creates an excess _____ of money. This causes interest rates to _____ and investment to _____. The change in investment causes aggregate demand to shift to the _____.

In the long run, changes in the money supply affect

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. The multiplier for this economy is

In the long run, fiscal policy primarily affects

According to liquidity preference theory, an increase in the price level shifts the

The is the most important automatic stabilizer.

Which of the following statements is correct for the short run?

Liquidity preference theory is most relevant to the

The Fed is concerned about stock market booms because the booms

Explain the logic according to liquidity preference theory by which an increase in the money supply changes the aggregate demand curve.

For the U.S. economy, the most important reason for the downward slope of the aggregate-demand curve is the interest-rate effect.