Question 1

An increase in the price level shifts the money demand curve to the left,causing interest rates to increase.

Accepted Answer

A) True 
 B)False

Question 2

Scenario 21-1.Take the following information as given for a small,imaginary economy:
 
-Refer to Scenario 21-1.The marginal propensity to consume for this economy is

Accepted Answer

A)   0.650.
B)   0.664.
C)   0.650 or 0.664,depending on whether income is $10,000 or $11,000.
D)   0.800.E) C) and D)
F) None of the above

Question 3

An example of an automatic stabilizer is

Accepted Answer

A)   unemployment benefits.
B)   a lowering of interest rates by the Fed.
C)   a decrease in money demand.
D)   a decrease in tax rates in response to a recession.E) A) and B)
F) B) and C)

Question 4

An increase in households' desired money holding causes a(n)_____ in interest rates.This causes a(n)_____ in investment spending and aggregate demand.

Accepted Answer

The answer of An increase in households' desired money holding...

Question 5

Changes in the interest rate help explain

Accepted Answer

A)   only the slope of,not shifts of aggregate demand.
B)   only shifts of,not the slope of aggregate demand.
C)   both the slope of and shifts of aggregate demand.
D)   neither the slope nor shifts of aggregate demand.E) B) and D)
F) A) and B)

Question 6

When the Fed decreases the money supply,we expect

Accepted Answer

A)   interest rates and stock prices to rise.
B)   interest rates and stock prices to fall.
C)   interest rates to rise and stock prices to fall.
D)   interest rates to fall and stock prices to rise.E) A) and B)
F) A) and C)

Question 7

It is likely that a constitutional amendment that required the government always to run a balanced budget would

Accepted Answer

A)   contribute to a more stable level of output.
B)   mitigate the crowding-out effect.
C)   eliminate the economy's automatic stabilizers.
D)   All of the above are correct.E) A) and B)
F) All of the above

Question 8

Assume the money market is initially in equilibrium.If the price level increases,then according to liquidity preference theory there is an excess

Accepted Answer

A)   supply of money until the interest rate increases.
B)   supply of money until the interest rate decreases.
C)   demand for money until the interest rate increases.
D)   demand for money until the interest rate decreases.E) A) and B)
F) A) and C)

Question 9

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

Accepted Answer

A)   an increase in the price level
B)   a decrease in the price level
C)   an increase in the interest rate
D)   a decrease in the interest rateE) None of the above
F) B) and C)

Question 10

A reduction in U.S net exports would shift U.S.aggregate demand

Accepted Answer

A)   rightward.In an attempt to stabilize the economy,the government could raise taxes.
B)   rightward.In an attempt to stabilize the economy,the government could cut taxes.
C)   leftward.In an attempt to stabilize the economy,the government could raise taxes.
D)   leftward.In an attempt to stabilize the economy,the government could cut taxes.E) None of the above
F) A) and B)

Question 11

Using the liquidity-preference model,when the Federal Reserve increases the money supply,

Accepted Answer

A)   the equilibrium interest rate decreases.
B)   the aggregate-demand curve shifts to the left.
C)   the quantity of goods and services demanded is unchanged for a given price level.
D)   the long-run aggregate-supply curve shifts to the right.E) None of the above
F) C) and D)

Question 12

Which of the following shifts aggregate demand to the left?

Accepted Answer

A)   an increase in the price level
B)   an increase in the money supply
C)   a decrease in the price level
D)   a decrease in the money supplyE) B) and C)
F) A) and C)

Question 13

Keynes used the term "animal spirits" to refer to

Accepted Answer

A)   policy makers harming the economy in the pursuit of self interest.
B)   arbitrary changes in attitudes of household and firms.
C)   mean-spirited economists who believed in the classical dichotomy.
D)   firms' relentless efforts to maximize profits.E) A) and B)
F) A) and C)

Question 14

Explain how unemployment insurance acts as an automatic stabilizer.

Accepted Answer

As income falls,unemployment rises.More ...

Question 15

Suppose an economy's marginal propensity to consume (MPC) is 0.6.Then

Accepted Answer

A)   1 + MPC + MPC 2 + MPC 3 = 1.844 and,if we continued adding up terms in this geometric series,we would get closer and closer to the multiplier value of 1.96.
B)   1 + MPC + MPC 2 + MPC 3 = 1.844 and,if we continued adding up terms in this geometric series,we would get closer and closer to the multiplier value of 3 .
C)   1 + MPC + MPC 2 + MPC 3 = 2.176 and,if we continued adding up terms in this geometric series,we would get closer and closer to the multiplier value of 3.
D)   1 + MPC + MPC 2 + MPC 3 = 2.176 and,if we continued adding up terms in this geometric series,we would get closer and closer to the multiplier value of 2.5.E) All of the above
F) C) and D)

Question 16

A reduction in personal income taxes increases Aggregate Demand through

Accepted Answer

A)   an increase in investment spending.
B)   an increase in national savings.
C)   an increase in private savings.
D)   an increase in personal consumption.E) B) and C)
F) A) and B)

Question 17

Figure 21-2.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.
 1, A)  the price level is held fixed at P1. B)  the interest rate is held fixed at r1. C)  the money supply is changing so as to keep the money market in equilibrium. D)  the expected inflation rate is changing so as to keep the real interest rate constant." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 21-2.As we move from one point to another along the money-demand curve MD1,

Accepted Answer

A)   the price level is held fixed at P1.
B)   the interest rate is held fixed at r1.
C)   the money supply is changing so as to keep the money market in equilibrium.
D)   the expected inflation rate is changing so as to keep the real interest rate constant.E) A) and D)
F) All of the above

Question 18

If the interest rate increases

Accepted Answer

A)   or if the price level increases,then people will want to hold more money.
B)   or if the price level increases,then people will want to hold less money.
C)   or if the price level decreases,then people will want to hold more money.
D)   or if the price level decreases,then people will want to hold less money.E) B) and C)
F) A) and B)

Question 19

Suppose the multiplier has a value that exceeds 1,and there are no crowding out or investment accelerator effects.Which of the following would shift aggregate demand to the right by more than the increase in expenditures?

Accepted Answer

A)   an increase in government expenditures
B)   an increase in net exports
C)   an increase in investment spending
D)   All of the above are correct.E) A) and C)
F) B) and D)

Question 20

When the Fed increases the money supply,the interest rate decreases.This decrease in the interest rate increases consumption and investment demand,so the aggregate-demand curve shifts to the right.

Accepted Answer

A) True 
 B)False

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

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

Correct Answer
verified

Explain how unemployment insurance acts as an automatic stabilizer.

Correct Answer
verified
As income falls,unemployment rises.More ...
View Answer

An increase in households' desired money holding causes a(n)_ in interest rates.This causes a(n)_ in investment spending and aggregate demand.

Correct Answer
verified

Assume the money market is initially in equilibrium.If the price level increases,then according to liquidity preference theory there is an excess

Correct Answer
verified

When the Fed increases the money supply,the interest rate decreases.This decrease in the interest rate increases consumption and investment demand,so the aggregate-demand curve shifts to the right.

Correct Answer
verified

Correct Answer
verified

Using the liquidity-preference model,when the Federal Reserve increases the money supply,

Correct Answer
verified

A reduction in personal income taxes increases Aggregate Demand through

Correct Answer
verified

Suppose an economy's marginal propensity to consume (MPC) is 0.6.Then

Correct Answer
verified

If the interest rate increases

Correct Answer
verified

Changes in the interest rate help explain

Correct Answer
verified

Which of the following shifts aggregate demand to the left?

Correct Answer
verified

An example of an automatic stabilizer is

Correct Answer
verified

Scenario 21-1.Take the following information as given for a small,imaginary economy: -Refer to Scenario 21-1.The marginal propensity to consume for this economy is

Correct Answer
verified

A reduction in U.S net exports would shift U.S.aggregate demand

Correct Answer
verified

Suppose the multiplier has a value that exceeds 1,and there are no crowding out or investment accelerator effects.Which of the following would shift aggregate demand to the right by more than the increase in expenditures?

Correct Answer
verified

An increase in the price level shifts the money demand curve to the left,causing interest rates to increase.

Correct Answer
verified

It is likely that a constitutional amendment that required the government always to run a balanced budget would

Correct Answer
verified

When the Fed decreases the money supply,we expect

Correct Answer
verified

Keynes used the term "animal spirits" to refer to

Correct Answer
verified

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

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

Correct AnswerverifiedShow Answer

Explain how unemployment insurance acts as an automatic stabilizer.

Correct AnswerverifiedAs income falls,unemployment rises.More ...View AnswerShow Answer

An increase in households' desired money holding causes a(n)_____ in interest rates.This causes a(n)_____ in investment spending and aggregate demand.

Correct AnswerverifiedShow Answer

Assume the money market is initially in equilibrium.If the price level increases,then according to liquidity preference theory there is an excess

Correct AnswerverifiedShow Answer

When the Fed increases the money supply,the interest rate decreases.This decrease in the interest rate increases consumption and investment demand,so the aggregate-demand curve shifts to the right.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Using the liquidity-preference model,when the Federal Reserve increases the money supply,

Correct AnswerverifiedShow Answer

A reduction in personal income taxes increases Aggregate Demand through

Correct AnswerverifiedShow Answer

Suppose an economy's marginal propensity to consume (MPC) is 0.6.Then

Correct AnswerverifiedShow Answer

If the interest rate increases

Correct AnswerverifiedShow Answer

Changes in the interest rate help explain

Correct AnswerverifiedShow Answer

Which of the following shifts aggregate demand to the left?

Correct AnswerverifiedShow Answer

An example of an automatic stabilizer is

Correct AnswerverifiedShow Answer

Scenario 21-1.Take the following information as given for a small,imaginary economy: -Refer to Scenario 21-1.The marginal propensity to consume for this economy is

Correct AnswerverifiedShow Answer

A reduction in U.S net exports would shift U.S.aggregate demand

Correct AnswerverifiedShow Answer

Suppose the multiplier has a value that exceeds 1,and there are no crowding out or investment accelerator effects.Which of the following would shift aggregate demand to the right by more than the increase in expenditures?

Correct AnswerverifiedShow Answer

An increase in the price level shifts the money demand curve to the left,causing interest rates to increase.

Correct AnswerverifiedShow Answer

It is likely that a constitutional amendment that required the government always to run a balanced budget would

Correct AnswerverifiedShow Answer

When the Fed decreases the money supply,we expect

Correct AnswerverifiedShow Answer

Keynes used the term "animal spirits" to refer to

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
As income falls,unemployment rises.More ...
View Answer

An increase in households' desired money holding causes a(n)_ in interest rates.This causes a(n)_ in investment spending and aggregate demand.

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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