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

The potential positive feedback that government spending may have on investment is known as the _____. The potential negative effect that government spending may have on investment is known as the _____ effect.

There are three factors that help explain the slope of the aggregate demand curve. Which two are less important? Why are they less important?

The theory of _____ states that the _____ adjusts to bring money supply and money demand into balance.

If it were not for the automatic stabilizers in the U.S. economy,

When the Fed buys government bonds, the reserves of the banking system

A 2009 article in The Economist noted that some studies have provided evidence indicating that multipliers are

A decrease in the domestic _____ causes domestic goods to become less expensive relative to foreign goods and increases net exports. The increase in net exports causes a(n) _____ in the quantity of domestic aggregate goods and services demanded and is known as the _____ effect.

Suppose households attempt to decrease their money holdings. To counter this decrease in money demand and stabilize output, the Federal Reserve will

The logic of the multiplier effect applies

To reduce the effects of crowding out caused by an increase in government expenditures, the Federal Reserve could

Tax increases

Which of the following statements is correct?

Supply-side economists believe that changes in government purchases affect

The additional shifts in aggregate demand that result when there is an increase in government spending is known as the _____.

If the multiplier is 5.25, then the MPC is

If the marginal propensity to consume is 4/5, then a decrease in government spending of $1 billion decreases the demand for goods and services by $5 billion.

If the Federal Reserve decreases the money supply, then initially there is a

According to classical macroeconomic theory,

On the graph that depicts the theory of liquidity preference,

A fiscal stimulus was initiated by President Obama in response to the economic downturn of 2008-2009. At that time, the president's economists estimated the multiplier to be