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

In a certain economy, when income is $1000, consumer spending is $800. The value of the multiplier for this economy is 2.5. It follows that, when income is $1020, consumer spending is

The theory of liquidity preference assumes that the nominal supply of money is determined by the

For the U.S. economy, money holdings are a

When households find themselves holding too much money, they respond by

According to the theory of liquidity preference, a decrease in the price level causes the

If, at some interest rate, the quantity of money demanded is less than the quantity of money supplied, people will desire to

Figure 34-1 -Refer to Figure 34-1. Which of the following is correct?

Critics of stabilization policy argue that

Explain why the interest rate is the opportunity cost of holding currency. What is the benefit of holding currency?

Charisse is of the opinion that the interest rate depends on the economy's saving propensities and investment opportunities. Most economists would say that Charisse's opinion is

Assume the following. -The MPC has a value of 0.8. -The relationship between the interest rate, r, and investment, I, is given by the equation, I = 20,000 - br, Where b is a positive constant. -Government purchases, G, are increased by $1,000. In which of the following cases would there be no crowding out?

If the Fed increases the money supply,

Stock prices often rise when the Fed raises interest rates.

Scenario 34-2. The following facts apply to a small, imaginary economy. -Consumption spending is $6,720 when income is $8,000. -Consumption spending is $7,040 when income is $8,500. -Refer to Scenario 34-2. The multiplier for this economy is

In the early 1960s, the Kennedy administration made considerable use of

When there is an excess supply of money,

According to liquidity preference theory, if the price level

According to liquidity preference theory, if there were a surplus of money, then

If the Federal Reserve increases the money supply, then initially people want to

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. What is measured along the horizontal axis of the left-hand graph?