Question 1

Other things the same, during recessions taxes tend to

Accepted Answer

A)  rise. The rise in taxes stimulates aggregate demand. 
B)  rise. The rise in taxes contracts aggregate demand. 
C)  fall. The fall in taxes stimulates aggregate demand. 
D)  fall. The fall in taxes contracts aggregate demand. 
A)  rise. The rise in taxes stimulates aggregate demand. 
B)  rise. The rise in taxes contracts aggregate demand. 
C)  fall. The fall in taxes stimulates aggregate demand. 
D)  fall. The fall in taxes contracts aggregate demand.

Question 2

A decrease in government spending

Accepted Answer

A)  increases the interest rate and so investment spending increases. 
B)  increases the interest rate and so decreases investment spending decreases. 
C)  decreases the interest rate and so investment spending increases. 
D)  decreases the interest rate and so investment spending decreases. 
A)  increases the interest rate and so investment spending increases. 
B)  increases the interest rate and so decreases investment spending decreases. 
C)  decreases the interest rate and so investment spending increases. 
D)  decreases the interest rate and so investment spending decreases.

Question 3

A surplus or shortage in the money market is eliminated by adjustments in the price level according to

Accepted Answer

A)  both liquidity preference theory and classical theory. 
B)  neither liquidity preference theory nor classical theory. 
C)  liquidity preference theory, but not classical theory. 
D)  classical theory, but not liquidity preference theory. 
A)  both liquidity preference theory and classical theory. 
B)  neither liquidity preference theory nor classical theory. 
C)  liquidity preference theory, but not classical theory. 
D)  classical theory, but not liquidity preference theory.

Question 4

Which of the following shifts aggregate demand to the left?

Accepted Answer

A)  an increase in the price level 
B)  an increase in the money supply 
C)  a decrease in the price level 
D)  a decrease in the money supply 
A)  an increase in the price level 
B)  an increase in the money supply 
C)  a decrease in the price level 
D)  a decrease in the money supply

Question 5

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

Question 6

Figure 34-3  
-Refer to Figure 34-3. What quantity is represented by the downward-sloping line on the left-hand graph?

Accepted Answer

A)  the supply of money 
B)  the demand for money 
C)  the rate of inflation 
D)  Aggregate Demand. 
A)  the supply of money 
B)  the demand for money 
C)  the rate of inflation 
D)  Aggregate Demand.

Question 7

Automatic stabilizers

Accepted Answer

A)  increase the problems that lags cause in using fiscal policy as a stabilization tool. 
B)  are changes in taxes or government spending that increase aggregate demand without requiring policy makers to act when the economy goes into recession. 
C)  are changes in taxes or government spending that policy makers quickly agree to when the economy goes into recession. 
D)  All of the above are correct. 
A)  increase the problems that lags cause in using fiscal policy as a stabilization tool. 
B)  are changes in taxes or government spending that increase aggregate demand without requiring policy makers to act when the economy goes into recession. 
C)  are changes in taxes or government spending that policy makers quickly agree to when the economy goes into recession. 
D)  All of the above are correct.

Question 8

Other things the same, automatic stabilizers tend to

Accepted Answer

A)  raise expenditures during expansions and recessions. 
B)  lower expenditures during expansions and recessions. 
C)  raise expenditures during recessions and lower expenditures during expansions. 
D)  raise expenditures during expansions and lower expenditures during recessions. 
A)  raise expenditures during expansions and recessions. 
B)  lower expenditures during expansions and recessions. 
C)  raise expenditures during recessions and lower expenditures during expansions. 
D)  raise expenditures during expansions and lower expenditures during recessions.

Exam 34: The Influence of Monetary and Fiscal Policy on Aggregate Demand

Other things the same, during recessions taxes tend to

A decrease in government spending

A surplus or shortage in the money market is eliminated by adjustments in the price level according to

Which of the following shifts aggregate demand to the left?

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.

Figure 34-3 -Refer to Figure 34-3. What quantity is represented by the downward-sloping line on the left-hand graph?

Automatic stabilizers

Other things the same, automatic stabilizers tend to

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Short-Run Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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