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Figure 34-14 Figure 34-14 -Refer to Figure 34-14.Households' desired money holdings are given by MD<sub>1</sub>.If the current rate of interest is r<sub>3</sub>,then there is excess -----.Households will ----- interest-earning assets,which causes the interest rate to -----. -Refer to Figure 34-14.Households' desired money holdings are given by MD1.If the current rate of interest is r3,then there is excess -----.Households will ----- interest-earning assets,which causes the interest rate to -----.

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

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To increase output,policymakers can ----- the money supply,----- taxes,and/or ----- government purchases.

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increase, ...

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Changes in aggregate demand can cause fluctuations in ----- and ----- in the short run,and only ---- in the long run.

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output, pr...

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Last year,total income increased $1,000 and consumption increased $800.An increase in government spending equal to $10 would cause output to increase by $----- because the multiplier is ------.

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Figure 34-13 Figure 34-13 -Refer to Figure 34-13.The economy is currently at point A.Given the current situation,the Federal Reserve will ----- bonds,which causes interest rates to -----. -Refer to Figure 34-13.The economy is currently at point A.Given the current situation,the Federal Reserve will ----- bonds,which causes interest rates to -----.

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

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liquidity ...

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When the interest rate is above equilibrium,there is excess ----- of money.Households will ----- interest-earning assets,which ----- the interest rate.

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supply, pu...

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A decrease in taxes ---- aggregate demand through larger ----- by households.

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increases,...

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The wealth-effect notes that a ----- price level increases the real value of households' wealth.The larger real wealth ----- the quantity of goods and services demanded.

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

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The nominal interest rate on currency is...

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Figure 34-10 Figure 34-10 -Refer to Figure 34-10.Suppose the multiplier is 4 and the economy is currently at point A.An increase in government purchases of $10 will increase aggregate demand to $----- if there is no crowding-out.If crowding-out exists,then aggregate demand will likely to increase to $-----. -Refer to Figure 34-10.Suppose the multiplier is 4 and the economy is currently at point A.An increase in government purchases of $10 will increase aggregate demand to $----- if there is no crowding-out.If crowding-out exists,then aggregate demand will likely to increase to $-----.

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

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The wealth effect and the exchange-rate ...

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

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supply, fa...

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Figure 34-10 Figure 34-10 -Refer to Figure 34-10.Suppose the multiplier is 2 and there is no crowding-out,but there is an accelerator effect.If the economy is currently at point A,then an increase in government purchases of $10 will likely increase aggregate demand to point ----- where output is $-----. -Refer to Figure 34-10.Suppose the multiplier is 2 and there is no crowding-out,but there is an accelerator effect.If the economy is currently at point A,then an increase in government purchases of $10 will likely increase aggregate demand to point ----- where output is $-----.

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The ease with which an asset can be converted into the medium of exchange is known as -----.

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Figure 34-12 Figure 34-12 -Refer to Figure 34-12.Suppose the multiplier is 5 and the economy is currently at point A.To stabilize output at $1000,the government should ----- purchases by $-----. -Refer to Figure 34-12.Suppose the multiplier is 5 and the economy is currently at point A.To stabilize output at $1000,the government should ----- purchases by $-----.

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To reduce aggregate demand,the government may reduce ----- or increase -----.

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government...

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When there is an excess demand for money,households will ----- interest-bearing bonds,causing interest rates to -----.

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What is the value of the multiplier if the marginal propensity to consume is 0.5?

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