Question 1

For the following questions,use the diagram below:
Figure 24-7. 1 to AD2 as a result of A)  an increase in government purchases. B)  a decrease in stock prices. C)  consumers and firms becoming more optimistic about the future. D)  an increase in the price level." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 24-7.The aggregate-demand curve could shift from AD1 to AD2 as a result of

Accepted Answer

A)   an increase in government purchases.
B)   a decrease in stock prices.
C)   consumers and firms becoming more optimistic about the future.
D)   an increase in the price level.E) A) and B)
F) B) and C)

Question 2

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

Accepted Answer

A)   Keynesian in nature,and that her view is more valid for the long run than for the short run.
B)   classical in nature,and that her view is more valid for the long run than for the short run.
C)   Keynesian in nature,and that her view is more valid for the short run than for the long run.
D)   classical in nature,and that her view is more valid for the short run than for the long run.E) All of the above
F) None of the above

Question 3

Which of the following is not a reason the aggregate-demand curve slopes downward? As the price level increases,

Accepted Answer

A)   firms may believe the relative price of their output has risen.
B)   real wealth declines.
C)   the interest rate increases.
D)   the exchange rate increases.E) None of the above
F) A) and D)

Question 4

Explain how unemployment insurance acts as an automatic stabilizer.

Accepted Answer

As income falls,unemployment rises.More ...

Question 5

If expected inflation is constant and the nominal interest rate increases by 3.5 percentage points,then the real interest rate

Accepted Answer

A)   increases by 3.5 percentage points.
B)   increases,but by less than 3.5 percentage points.
C)   decreases,but by less than 3.5 percentage points.
D)   decreases by 3.5 percentage points.E) A) and B)
F) B) and C)

Question 6

Figure 24-1 
-Refer to Figure 24-1.Which of the following is correct?

Accepted Answer

A)   If the interest rate is 4 percent,there is excess money demand,and the interest rate will fall.
B)   If the interest rate is 3 percent,there is excess money supply,and the interest rate will rise.
C)   Starting with an interest rate of 4 percent,the demand for goods and services will increase until the money market reaches a new equilibrium.
D)   None of the above is correct.E) A) and B)
F) A) and C)

Question 7

When the interest rate decreases,the opportunity cost of holding money

Accepted Answer

A)   increases,so the quantity of money demanded increases.
B)   increases,so the quantity of money demanded decreases.
C)   decreases,so the quantity of money demanded increases.
D)   decreases,so the quantity of money demanded decreases.E) A) and D)
F) A) and C)

Question 8

A tax cut shifts aggregate demand

Accepted Answer

A)   by more than the amount of the tax cut.
B)   by the same amount as the tax cut.
C)   by less than the tax cut.
D)   None of the above is necessarily correct.E) A) and B)
F) A) and D)

Question 9

The short-run effects on the interest rate are

Accepted Answer

A)   shown equally well using either liquidity preference theory or classical theory.
B)   best shown using classical theory.
C)   best shown using liquidity preference theory.
D)   not shown well by either liquidity preference theory or classical theory.E) A) and B)
F) B) and C)

Question 10

Some economists argue that

Accepted Answer

A)   monetary policy should actively be used to stabilize the economy.
B)   fiscal policy should actively be used to stabilize the economy.
C)   fiscal policy can be used to shift the AD curve.
D)   All of the above are correct.E) All of the above
F) A) and C)

Question 11

In recent years,the Federal Reserve has conducted policy by setting a target for the

Accepted Answer

A)   size of the money supply.
B)   growth rate of the money supply.
C)   federal funds rate.
D)   discount rate.E) B) and C)
F) C) and D)

Question 12

Tax cuts

Accepted Answer

A)   and increases in government expenditures shift aggregate demand right.
B)   and increases in government expenditures shift aggregate demand left.
C)   shift aggregate demand right while increases in government expenditures shift aggregate demand left.
D)   shift aggregate demand left while increases in government expenditures shift aggregate demand right.E) None of the above
F) A) and D)

Question 13

Supply-side economists believe that changes in government purchases affect

Accepted Answer

A)   only aggregate demand.
B)   only aggregate supply.
C)   both aggregate demand and aggregate supply.
D)   neither aggregate demand nor aggregate supply.E) B) and C)
F) All of the above

Question 14

Which of the following tends to make the size of a shift in aggregate demand resulting from a tax cut smaller than it otherwise would be?

Accepted Answer

A)   the multiplier effect
B)   the crowding-out effect
C)   the accelerator effect
D)   None of the above is correct.E) B) and D)
F) A) and B)

Question 15

Which of the following policies would be advocated by someone who wants the government to follow an active stabilization policy when the economy is experiencing severe unemployment?

Accepted Answer

A)   decrease the money supply
B)   increase government expenditures
C)   increase taxes
D)   All of the above are correct.E) All of the above
F) A) and B)

Question 16

In the short run,

Accepted Answer

A)   the price level alone adjusts to balance the supply and demand for money.
B)   output responds to changes in the aggregate demand for goods and services.
C)   changes in the money supply cause a proportional change in the price level.
D)   increases in the money supply shift the aggregate supply curve causing output to rise.E) A) and B)
F) A) and C)

Question 17

Figure 24-1 
-Refer to Figure 24-1.There is an excess demand for money at an interest rate of

Accepted Answer

A)   2 percent.
B)   3 percent.
C)   4 percent.
D)   None of the above is correct.E) B) and C)
F) All of the above

Question 18

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 19

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

Accepted Answer

A)   large part of household wealth,and so the interest-rate effect is large.
B)   large part of household wealth,and so the wealth effect is large.
C)   small part of household wealth,and so the interest-rate effect is small.
D)   small part of household wealth,and so the wealth effect is small.E) A) and B)
F) A) and C)

Question 20

Other things the same,an increase in taxes shifts aggregate demand to the left.In the short run this makes output fall which makes the interest rate rise.

Accepted Answer

A) True 
 B)False

Exam 24: The Influence of Monetary and Fiscal Policy on Aggregate Demand

In recent years,the Federal Reserve has conducted policy by setting a target for the

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Supply-side economists believe that changes in government purchases affect

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A tax cut shifts aggregate demand

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The short-run effects on the interest rate are

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

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Figure 24-1 -Refer to Figure 24-1.There is an excess demand for money at an interest rate of

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In the short run,

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Other things the same,an increase in taxes shifts aggregate demand to the left.In the short run this makes output fall which makes the interest rate rise.

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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

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Which of the following is not a reason the aggregate-demand curve slopes downward? As the price level increases,

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Some economists argue that

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Figure 24-1 -Refer to Figure 24-1.Which of the following is correct?

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

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For the following questions,use the diagram below: Figure 24-7. -Refer to Figure 24-7.The aggregate-demand curve could shift from AD1 to AD2 as a result of

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If expected inflation is constant and the nominal interest rate increases by 3.5 percentage points,then the real interest rate

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Which of the following policies would be advocated by someone who wants the government to follow an active stabilization policy when the economy is experiencing severe unemployment?

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Explain how unemployment insurance acts as an automatic stabilizer.

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

Which of the following tends to make the size of a shift in aggregate demand resulting from a tax cut smaller than it otherwise would be?

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Tax cuts

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When the interest rate decreases,the opportunity cost of holding money

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For the following questions,use the diagram below: Figure 24-7. -Refer to Figure 24-7.The aggregate-demand curve could shift from AD₁ to AD₂ as a result of

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As income falls,unemployment rises.More ...
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