Exam 34: The Influence of Monetary and Fiscal Policy on Aggregate Demand

In the long run, fiscal policy influences

Sometimes during wars, government expenditures are larger than normal. To reduce the effects this spending creates on interest rates,

The opportunity cost of holding money

To decrease the interest rate the Federal Reserve could

An increase in the interest rate could have been caused by

A 2009 article in The Economist noted that

The crowding-out effect occurs because an increase in government spending _____ interest rates, causing _____ to fall.

The Kennedy tax cut of 1964 was

Other things the same, which of the following responses would we expect from an increase in U.S. interest rates?

Which of the following events would shift money demand to the left?

To offset increased pessimism by households, the government may _____ government spending and/or _____ taxes.

The change in aggregate demand that results from fiscal expansion changing the interest rate is called the

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

Open-market purchases cause a(n) in interest rates and a(n) in real GDP in the short run.

If expected inflation is constant and the nominal interest rate decreases by 2 percentage points, then the real interest rate

Suppose there was a large increase in net exports. If the Fed wanted to stabilize output, it could

The lag problem associated with fiscal policy is due mostly to

If taxes

The interest rate that the Federal Reserve pays banks on the reserves they hold is called the

An increase in the money supply will