Question 1

In a certain economy,when income is $400,consumer spending is $350.The value of the multiplier for this economy is 3.125.It follows that,when income is $450,consumer spending is

Accepted Answer

A)   $384.For this economy,an initial impulse of $50 in consumer spending translates into a $146.67 increase in aggregate demand.
B)   $384.For this economy,an initial impulse of $50 in consumer spending translates into a $156.25 increase in aggregate demand.
C)   $389.38.For this economy,an initial impulse of $50 in consumer spending translates into a $146.67 increase in aggregate demand.
D)   $389.38.For this economy,an initial impulse of $50 in consumer spending translates into a $156.25 increase in aggregate demand.E) A) and C)
F) A) and B)

Question 2

Suppose that consumers become pessimistic about the future health of the economy.What will happen to aggregate demand and to output? What might the president and Congress have to do to keep output stable?

Accepted Answer

As consumers become pessimistic about th...

Question 3

Figure 24-2.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 24-2.If the money-supply curve MS on the left-hand graph were to shift to the right,this would

Accepted Answer

A)   represent an action taken by the Federal Reserve.
B)   shift the AD curve to the left.
C)   create,until the interest rate adjusted,an excess demand for money at the interest rate that equilibrated the money market before the shift.
D)   All of the above are correct.E) C) and D)
F) A) and C)

Question 4

According to liquidity preference theory,the slope of the money demand curve is explained as follows:

Accepted Answer

A)   Interest rates rise as the Fed reduces the quantity of money demanded.
B)   Interest rates fall as the Fed reduces the supply of money.
C)   People will want to hold less money as the cost of holding it falls.
D)   People will want to hold more money as the cost of holding it falls.E) C) and D)
F) A) and D)

Question 5

Figure 24-2.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 24-2.Which of the following quantities is held constant as we move from one point to another on either graph?

Accepted Answer

A)   the nominal interest rate
B)   the quantity of money demanded
C)   investment
D)   the expected rate of inflationE) None of the above
F) A) and B)

Question 6

Figure 24-2.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 24-2.If the graphs apply to an economy such as the U.S.economy,then the slope of the AD curve is primarily attributable to the

Accepted Answer

A)   wealth effect.
B)   interest-rate effect.
C)   exchange-rate effect.
D)   Fisher effect.E) C) and D)
F) A) and B)

Question 7

According to John Maynard Keynes,

Accepted Answer

A)   the demand for money in a country is determined entirely by that nation's central bank.
B)   the supply of money in a country is determined by the overall wealth of the citizens of that country.
C)   the interest rate adjusts to balance the supply of,and demand for,money.
D)   the interest rate adjusts to balance the supply of,and demand for,goods and services.E) B) and D)
F) B) and C)

Question 8

An increase in the U.S.interest rate

Accepted Answer

A)   raises the opportunity cost of holding dollars.
B)   induces households to increase consumption.
C)   shifts money demand to the right.
D)   leads to a depreciation of the U.S.dollar.E) None of the above
F) B) and D)

Question 9

To decrease the interest rate the Federal Reserve could

Accepted Answer

A)   buy bonds.The fall in the interest rate would increase investment spending.
B)   buy bonds.The fall in the interest rate would decrease investment spending.
C)   sell bonds.The fall in the interest rate would increase investment spending
D)   sell bonds.The fall in the interest rate would decrease investment spending.E) B) and C)
F) A) and C)

Question 10

Paul Samuelson,a famous economist,said that

Accepted Answer

A)   "the bond market has predicted zero out of the past nine recessions."
B)   "the stock market has predicted zero out of the past nine recessions."
C)   "the bond market has predicted nine out of the past five recessions."
D)   "the stock market has predicted nine out of the past five recessions."E) None of the above
F) A) and C)

Question 11

Figure 24-6.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 to r2,then A)  there would be no crowding out. B)  the full multiplier effect of the increase in government purchases would be realized. C)  the AD curves that actually apply,before and after the change in government purchases,would be separated horizontally by the distance equal to the multiplier times the change in government purchases. D)  All of the above are correct." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 24-6.Suppose the graphs are drawn to show the effects of an increase in government purchases.If it were not for the increase in r from r1 to r2,then

Accepted Answer

A)   there would be no crowding out.
B)   the full multiplier effect of the increase in government purchases would be realized.
C)   the AD curves that actually apply,before and after the change in government purchases,would be separated horizontally by the distance equal to the multiplier times the change in government purchases.
D)   All of the above are correct.E) A) and C)
F) B) and D)

Question 12

If the price level falls,then

Accepted Answer

A)   the interest rate falls and spending on goods and services falls.
B)   the interest rate falls and spending on goods and services rises.
C)   the interest rate rises and spending on goods and services falls.
D)   the interest rate rises and spending on goods and services rises.E) B) and C)
F) A) and C)

Question 13

Which among the following assets is the most liquid?

Accepted Answer

A)   corporate bonds
B)   fine art
C)   deposits that can be withdrawn using ATMs
D)   shares of stockE) B) and D)
F) B) and C)

Question 14

What is the difference between monetary policy and fiscal policy?

Accepted Answer

The Federal Reserve Bank conducts U.S.mo...

Question 15

Scenario 24-1.Take the following information as given for a small,imaginary economy:
 
-Refer to Scenario 24-1.The multiplier for this economy is

Accepted Answer

A)   2.86.
B)   2.98.
C)   4.00.
D)   5.00.E) B) and D)
F) A) and B)

Question 16

Which of the following properly describes the interest-rate effect?

Accepted Answer

A)   A higher price level leads to higher money demand; higher money demand leads to higher interest rates; a higher interest rate increases the quantity of goods and services demanded.
B)   A higher price level leads to higher money demand; higher money demand leads to lower interest rates; a higher interest rate reduces the quantity of goods and services demanded.
C)   A lower price level leads to lower money demand; lower money demand leads to lower interest rates; a lower interest rate reduces the quantity of goods and services demanded.
D)   A lower price level leads to lower money demand; lower money demand leads to lower interest rates; a lower interest rate increases the quantity of goods and services demanded.E) All of the above
F) None of the above

Question 17

During recessions,taxes tend to

Accepted Answer

A)   rise and thereby increase aggregate demand.
B)   rise and thereby decrease aggregate demand.
C)   fall and thereby increase aggregate demand.
D)   fall and thereby decrease aggregate demand.E) B) and D)
F) C) and D)

Question 18

According to liquidity preference theory,an increase in money demand for some reason other than a change in the price level causes

Accepted Answer

A)   the interest rate to fall,so aggregate demand shifts right.
B)   the interest rate to fall,so aggregate demand shifts left.
C)   the interest rate to rise,so aggregate demand shifts right.
D)   the interest rate to rise,so aggregate demand shifts left.E) A) and B)
F) All of the above

Question 19

The multiplier is computed as MPC / (1 - MPC).

Accepted Answer

A) True 
 B)False

Question 20

Opponents of active stabilization policy

Accepted Answer

A)   advocate a monetary policy designed to offset changes in the unemployment rate.
B)   argue that fiscal policy is unable to change aggregate demand or aggregate supply.
C)   believe that the political process creates lags in the implementation of fiscal policy.
D)   None of the above is correct.E) None of the above
F) A) and D)

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

To decrease the interest rate the Federal Reserve could

Correct Answer
verified

What is the difference between monetary policy and fiscal policy?

Correct Answer
verified
The Federal Reserve Bank conducts U.S.mo...
View Answer

The multiplier is computed as MPC / (1 - MPC).

Correct Answer
verified

Paul Samuelson,a famous economist,said that

Correct Answer
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Correct Answer
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Correct Answer
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Opponents of active stabilization policy

Correct Answer
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Which among the following assets is the most liquid?

Correct Answer
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According to John Maynard Keynes,

Correct Answer
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Correct Answer
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Correct Answer
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An increase in the U.S.interest rate

Correct Answer
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Scenario 24-1.Take the following information as given for a small,imaginary economy: -Refer to Scenario 24-1.The multiplier for this economy is

Correct Answer
verified

During recessions,taxes tend to

Correct Answer
verified

If the price level falls,then

Correct Answer
verified

According to liquidity preference theory,an increase in money demand for some reason other than a change in the price level causes

Correct Answer
verified

In a certain economy,when income is $400,consumer spending is $350.The value of the multiplier for this economy is 3.125.It follows that,when income is $450,consumer spending is

Correct Answer
verified

Suppose that consumers become pessimistic about the future health of the economy.What will happen to aggregate demand and to output? What might the president and Congress have to do to keep output stable?

Correct Answer
verified
As consumers become pessimistic about th...
View Answer

According to liquidity preference theory,the slope of the money demand curve is explained as follows:

Correct Answer
verified

Which of the following properly describes the interest-rate effect?

Correct Answer
verified

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

To decrease the interest rate the Federal Reserve could

Correct AnswerverifiedShow Answer

What is the difference between monetary policy and fiscal policy?

Correct AnswerverifiedThe Federal Reserve Bank conducts U.S.mo...View AnswerShow Answer

The multiplier is computed as MPC / (1 - MPC).

Correct AnswerverifiedShow Answer

Paul Samuelson,a famous economist,said that

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Opponents of active stabilization policy

Correct AnswerverifiedShow Answer

Which among the following assets is the most liquid?

Correct AnswerverifiedShow Answer

According to John Maynard Keynes,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

An increase in the U.S.interest rate

Correct AnswerverifiedShow Answer

Scenario 24-1.Take the following information as given for a small,imaginary economy: -Refer to Scenario 24-1.The multiplier for this economy is

Correct AnswerverifiedShow Answer

During recessions,taxes tend to

Correct AnswerverifiedShow Answer

If the price level falls,then

Correct AnswerverifiedShow Answer

According to liquidity preference theory,an increase in money demand for some reason other than a change in the price level causes

Correct AnswerverifiedShow Answer

In a certain economy,when income is $400,consumer spending is $350.The value of the multiplier for this economy is 3.125.It follows that,when income is $450,consumer spending is

Correct AnswerverifiedShow Answer

Suppose that consumers become pessimistic about the future health of the economy.What will happen to aggregate demand and to output? What might the president and Congress have to do to keep output stable?

Correct AnswerverifiedAs consumers become pessimistic about th...View AnswerShow Answer

According to liquidity preference theory,the slope of the money demand curve is explained as follows:

Correct AnswerverifiedShow Answer

Which of the following properly describes the interest-rate effect?

Correct AnswerverifiedShow Answer

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The Federal Reserve Bank conducts U.S.mo...
View Answer

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As consumers become pessimistic about th...
View Answer

Correct Answer
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Correct Answer
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