Exam 15: The Influence of Monetary and Fiscal Policy on Aggregate Demand

Assume the money market is initially in equilibrium.If the price level decreases,according to liquidity-preference theory,what is in excess and for how long?

Suppose the closed economy is in long-run equilibrium.Technological change shifts the long-run aggregate-supply curve $80 billion to the right.At the same time,government purchases increase by $40 billion.If the MPC equals 0.75 and the crowding-out effect is $70 billion,what would we expect to happen in the long-run to real GDP and the price level?

How do permanent tax cuts shift the AD curve compared with temporary tax results?

Which of the following defines the government purchases multiplier?

Use the money market to explain why the aggregate demand curve slopes downward.

Which statement best explains the crowding-out effect?

According to the crowding-out effect,how do the interest rate and investment spending change when government spending increases?

How does a reduction in the money supply by the Bank of Canada make owning stocks less attractive?

Both the multiplier and the investment accelerator tend to make the aggregate-demand curve shift farther than the increase in government expenditures.

Why and in what way are fiscal policy lags different from monetary policy lags?

Permanent tax cuts have a larger impact on consumption spending than temporary ones.

In a small open economy with a flexible exchange rate,what will an expansionary fiscal policy cause?

In which situation do people want to hold less money?

What is the main reason the aggregate-demand curve slopes downward?

When the Bank of Canada buys government bonds,how do the reserves of the banking system change and what happens to the money supply?

If the Bank of Canada conducts open-market sales,how do the money supply and the aggregate demand change?

Which of the following defines the government purchases multiplier?

Stock prices often rise when the Bank of Canada raises interest rates.

Which statement is consistent with the supply-side theories?

Which term refers to the positive feedback from aggregate demand to investment?