Exam 21: The Influence of Monetary and Fiscal Policy on Aggregate Demand

Figure 34-2. 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 34-2. A decrease in Y from Y1 to Y2 is explained as follows:

When the Fed lowers the growth rate of the money supply, it must take into account

Assume the multiplier is 5 and that the crowding-out effect is $30 billion. An increase in government purchases of $20 billion will shift the aggregate-demand curve to the

Figure 34-4. On the figure, MS represents money supply and MD represents money demand. -Refer to Figure 34-4. Suppose the current equilibrium interest rate is r1. Let Y1 represent the corresponding quantity of goods and services demanded, and let P1 represent the corresponding price level. Starting from this situation, if the Federal Reserve increases the money supply and if the price level remains at P1, then

Macroeconomic forecasts are

A tax cut shifts the aggregate demand curve the farthest if

Which of the following effects results from the change in the interest rate created by an increase in government spending?

Which of the following are effects of an increase in government spending financed by a tax increase?

The Fed can influence the money supply by changing the interest rate it pays banks on the reserves they are holding.

The theory of liquidity preference is largely at odds with the basic ideas of supply and demand.

Figure 34-1 -Refer to Figure 34-1. If the current interest rate is 2 percent,

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

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

Monetary policy

When the interest rate is above the equilibrium level,

Other things the same, as the price level rises,

In the short run, an increase in the money supply causes interest rates to

According to liquidity preference theory, if the price level

When there is an excess supply of money,

A significant example of a temporary tax cut was the one announced in 1992 by President George H. W. Bush. The effect of that tax cut on consumer spending and aggregate demand was