Question 1

If the interest rate is above the Fed's target, the Fed should

Accepted Answer

A)  buy bonds to increase bank reserves.
B)  buy bonds to decrease bank reserves.
C)  sell bonds to increase bank reserves.
D)  sell bonds to decrease bank reserves.E) A) and C)
F) B) and D)

Question 2

If the stock market booms, then

Accepted Answer

A)  aggregate demand increases, which the Fed could offset by increasing the money supply.
B)  aggregate supply increases, which the Fed could offset by increasing the money supply.
C)  aggregate demand increases, which the Fed could offset by decreasing the money supply.
D)  aggregate supply increases, which the Fed could offset by decreasing the money supply.E) All of the above
F) B) and C)

Question 3

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

Accepted Answer

supply, fa...

Question 4

For the U.S. economy, which of the following is the most important reason for the downward slope of the aggregate-demand curve?

Accepted Answer

A)  the wealth effect
B)  the interest-rate effect
C)  the exchange-rate effect
D)  the real-wage effectE) C) and D)
F) All of the above

Question 5

A tax increase has

Accepted Answer

A)  a multiplier effect but not a crowding out effect
B)  a crowding out effect but not a multiplier effect
C)  both a crowding out and multiplier effect
D)  neither a multiplier or crowding out effectE) C) and D)
F) None of the above

Question 6

In 2009 President Obama and Congress increased government spending. Some economists thought this increase would have little effect on output. Which of the following would make the effect of an increase in government expenditures on aggregate demand smaller?

Accepted Answer

A)  the MPC is small and changes in the interest rate have a small effect on investment
B)  the MPC is small and changes in the interest rate have a large effect on investment
C)  the MPC is large and changes in the interest rate have a small effect on investment
D)  the MPC is large and changes in the interest rate have a large effect on investmentE) A) and B)
F) All of the above

Question 7

Scenario 34-1. Take the following information as given for a small, imaginary economy:
• When income is $10,000, consumption spending is $6,500.
• When income is $11,000, consumption spending is $7,250.
-Refer to Scenario 34-1. The marginal propensity to consume for this economy is

Accepted Answer

A)  0.650.
B)  0.750.
C)  0.650 or 0.664, depending on whether income is $10,000 or $11,000.
D)  0.800.E) A) and B)
F) C) and D)

Question 8

Which of the following policy actions shifts the aggregate-demand curve?

Accepted Answer

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

Question 9

Suppose that the government spends more on a missile defense program. What does this do to aggregate demand? How is your answer affected by the presence of the multiplier, crowding-out, taxes, and investment-accelerator effects?

Accepted Answer

The increase in expenditures means that ...

Question 10

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) B) and D)

Question 11

Which of the following sequences best represents the crowding-out effect?

Accepted Answer

A)  government purchases ↑ ⇒ GDP ↑ ⇒ supply of money ↓⇒ equilibrium interest rate ↑ ⇒ quantity of goods and services demanded ↓
B)  government purchases ↓ ⇒ GDP ↓ ⇒ demand for money ↓⇒ equilibrium interest rate ↓ ⇒ quantity of goods and services demanded ↓
C)  government purchases ↑ ⇒ GDP ↑ ⇒ demand for money ↑⇒ equilibrium interest rate ↑ ⇒ quantity of goods and services demanded ↓
D)  taxes ↑ ⇒ GDP ↓ ⇒ demand for money ↓ ⇒ equilibrium interest rate ↑⇒ quantity of goods and services demanded ↓E) A) and B)
F) None of the above

Question 12

Scenario 34-2. The following facts apply to a small, imaginary economy.
• Consumption spending is $6,720 when income is $8,000.
• Consumption spending is $7,040 when income is $8,500.
-Refer to Scenario 34-2. In response to which of the following events could aggregate demand increase by $1,500?

Accepted Answer

A)  A stock-market boom stimulates consumer spending by $300, and there is an operative crowding-out effect.
B)  A stock-market boom stimulates consumer spending by $550, and there is a small operative crowding-out effect.
C)  An economic boom overseas increases the demand for U.S. net exports by $550, and there is no crowding-out effect.
D)  An economic boom overseas increases the demand for U.S. net exports by $300, and there is no crowding-out effect.E) B) and D)
F) A) and D)

Question 13

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. If the money-supply curve MS on the left-hand graph were to shift to the left, 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) B) and C)
F) All of the above

Question 14

​​According to the IGM poll, what percentage of economists polled agreed that the unemployment rate at the end of 2010 was lower with ARRA than without?

Accepted Answer

A)  ​97%
B)  ​75%
C)  ​19%
D)  ​3%E) B) and C)
F) C) and D)

Question 15

President Kennedy's team of economic advisers included such prominent economists​ as

Accepted Answer

A)  ​James Tobin and Robert Solow.
B)  ​N. Gregory Mankiw and Paul Krugman.
C)  ​John Maynard Keynes and Friedrich Hayek.
D)  ​Austan Goolsbee and Justin Wolfers.E) All of the above
F) C) and D)

Question 16

Which of the following actions might we logically expect to result from rising stock prices?

Accepted Answer

A)  Jim decreases his consumption spending.
B)  Firms sell fewer shares of new stock.
C)  Firms spend more on investment.
D)  None of the above is correct.E) B) and C)
F) None of the above

Question 17

According to liquidity preference theory, the money-supply curve is

Accepted Answer

A)  upward sloping.
B)  downward sloping.
C)  vertical.
D)  horizontal.E) All of the above
F) C) and D)

Question 18

If the Federal Reserve's goal is to stabilize aggregate demand, then in response to an increase in money demand, the Federal Reserve will _____ the money supply.

Accepted Answer

The answer of If the Federal Reserve's goal is to...

Question 19

Figure 34-1 
-Refer to Figure 34-1. 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) A) and B)
F) A) and C)

Question 20

According to the theory of liquidity preference, the interest rate adjusts to balance the supply of, and demand for, loanable funds.

Accepted Answer

A) True 
 B)False

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

According to liquidity preference theory, the money-supply curve is

Correct Answer
verified

Scenario 34-1. Take the following information as given for a small, imaginary economy: • When income is $10,000, consumption spending is $6,500. • When income is $11,000, consumption spending is $7,250. -Refer to Scenario 34-1. The marginal propensity to consume for this economy is

Correct Answer
verified

Which of the following sequences best represents the crowding-out effect?

Correct Answer
verified

Suppose that the government spends more on a missile defense program. What does this do to aggregate demand? How is your answer affected by the presence of the multiplier, crowding-out, taxes, and investment-accelerator effects?

Correct Answer
verified
The increase in expenditures means that ...
View Answer

A tax increase has

Correct Answer
verified

Figure 34-1 -Refer to Figure 34-1. There is an excess demand for money at an interest rate of

Correct Answer
verified

For the U.S. economy, which of the following is the most important reason for the downward slope of the aggregate-demand curve?

Correct Answer
verified

If the stock market booms, then

Correct Answer
verified

Which of the following policy actions shifts the aggregate-demand curve?

Correct Answer
verified

Correct Answer
verified

President Kennedy's team of economic advisers included such prominent economists as

Correct Answer
verified

If the Federal Reserve's goal is to stabilize aggregate demand, then in response to an increase in money demand, the Federal Reserve will _____ the money supply.

Correct Answer
verified

According to the IGM poll, what percentage of economists polled agreed that the unemployment rate at the end of 2010 was lower with ARRA than without?

Correct Answer
verified

Which of the following actions might we logically expect to result from rising stock prices?

Correct Answer
verified

If the interest rate is above the Fed's target, the Fed should

Correct Answer
verified

According to the theory of liquidity preference, the interest rate adjusts to balance the supply of, and demand for, loanable funds.

Correct Answer
verified

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

Correct Answer
verified
supply, fa...
View Answer

In 2009 President Obama and Congress increased government spending. Some economists thought this increase would have little effect on output. Which of the following would make the effect of an increase in government expenditures on aggregate demand smaller?

Correct Answer
verified

Supply-side economists believe that changes in government purchases affect

Correct Answer
verified

Scenario 34-2. The following facts apply to a small, imaginary economy. • Consumption spending is $6,720 when income is $8,000. • Consumption spending is $7,040 when income is $8,500. -Refer to Scenario 34-2. In response to which of the following events could aggregate demand increase by $1,500?

Correct Answer
verified

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

According to liquidity preference theory, the money-supply curve is

Correct AnswerverifiedShow Answer

Scenario 34-1. Take the following information as given for a small, imaginary economy: • When income is $10,000, consumption spending is $6,500. • When income is $11,000, consumption spending is $7,250. -Refer to Scenario 34-1. The marginal propensity to consume for this economy is

Correct AnswerverifiedShow Answer

Which of the following sequences best represents the crowding-out effect?

Correct AnswerverifiedShow Answer

Suppose that the government spends more on a missile defense program. What does this do to aggregate demand? How is your answer affected by the presence of the multiplier, crowding-out, taxes, and investment-accelerator effects?

Correct AnswerverifiedThe increase in expenditures means that ...View AnswerShow Answer

A tax increase has

Correct AnswerverifiedShow Answer

Figure 34-1 -Refer to Figure 34-1. There is an excess demand for money at an interest rate of

Correct AnswerverifiedShow Answer

For the U.S. economy, which of the following is the most important reason for the downward slope of the aggregate-demand curve?

Correct AnswerverifiedShow Answer

If the stock market booms, then

Correct AnswerverifiedShow Answer

Which of the following policy actions shifts the aggregate-demand curve?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

President Kennedy's team of economic advisers included such prominent economists​ as

Correct AnswerverifiedShow Answer

If the Federal Reserve's goal is to stabilize aggregate demand, then in response to an increase in money demand, the Federal Reserve will _____ the money supply.

Correct AnswerverifiedShow Answer

​​According to the IGM poll, what percentage of economists polled agreed that the unemployment rate at the end of 2010 was lower with ARRA than without?

Correct AnswerverifiedShow Answer

Which of the following actions might we logically expect to result from rising stock prices?

Correct AnswerverifiedShow Answer

If the interest rate is above the Fed's target, the Fed should

Correct AnswerverifiedShow Answer

According to the theory of liquidity preference, the interest rate adjusts to balance the supply of, and demand for, loanable funds.

Correct AnswerverifiedShow Answer

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

Correct Answerverifiedsupply, fa...View AnswerShow Answer

In 2009 President Obama and Congress increased government spending. Some economists thought this increase would have little effect on output. Which of the following would make the effect of an increase in government expenditures on aggregate demand smaller?

Correct AnswerverifiedShow Answer

Supply-side economists believe that changes in government purchases affect

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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The increase in expenditures means that ...
View Answer

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President Kennedy's team of economic advisers included such prominent economists as

Correct Answer
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Correct Answer
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According to the IGM poll, what percentage of economists polled agreed that the unemployment rate at the end of 2010 was lower with ARRA than without?

Correct Answer
verified

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

Correct Answer
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supply, fa...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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