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

Which of the following policy alternatives would be an appropriate response to a sharp increase in investment spending, assuming policymakers want to stabilize output?

When the money supply increases, there is an excess _____ of money. As a result, interest rates _____ and aggregate demand _____.

A tax increase has

If a $1,000 increase in income leads to an $800 increase in consumption expenditures, then the marginal propensity to consume is

If net exports fall $40 billion, the MPC is 9/11, and there is a multiplier effect but no crowding out and no investment accelerator, then

Figure 34-8 -Refer to Figure 34-8. An increase in government purchases will

An increase in government purchases is likely to

When the Fed announces a target for the federal funds rate, it essentially accommodates the day-to-day fluctuations in money demand by adjusting the money supply accordingly.

In the long run, the level of output

Which of the following is not an automatic stabilizer?

Which of the following policies would Keynes's followers support when an increase in business optimism shifts the aggregate demand curve away from long-run equilibrium?

Other things the same, an increase in the price level causes the real value of the dollar to fall in the market for foreign-currency exchange.

Most economists believe that fiscal policy

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. Assume the money market is always in equilibrium. Under the assumptions of the model,

If households view a tax cut as temporary, then the tax cut

Suppose that the Federal reserve is concerned about the effects of falling stock prices on the economy. What could it do?

Shifts in the aggregate-demand curve can cause fluctuations in

For the U.S. economy, which of the following is the most important reason for the downward slope of the aggregate-demand curve?

An essential piece of the liquidity preference theory is the demand for money.

If the Fed conducts open-market purchases, the money supply