Question 1

In the short run,an increase in government expenditures

Accepted Answer

A)   raises the price level,but not real GDP.
B)   raises real GDP,but not the price level.
C)   raises real GDP and the price level.
D)   raises neither real GDP nor the price level.E) All of the above
F) B) and C)

Question 2

The wealth effect stems from the idea that a higher price level

Accepted Answer

A)   increases the real value of households' money holdings.
B)   decreases the real value of households' money holdings.
C)   increases the real value of the domestic currency in foreign-exchange markets.
D)   decreases the real value of the domestic currency in foreign-exchange markets.E) All of the above
F) None of the above

Question 3

In a certain economy,when income is $100,consumer spending is $60.The value of the multiplier for this economy is 3.It follows that,when income is $101,consumer spending is

Accepted Answer

A)   $60.60.
B)   $60.67.
C)   $61.33.
D)   $63.00.E) All of the above
F) A) and B)

Question 4

Which of the following policies would be advocated by someone who wants the government to follow an active stabilization policy when the economy is experiencing severe unemployment?

Accepted Answer

A)   decrease the money supply
B)   increase government expenditures
C)   increase taxes
D)   All of the above are correct.E) None of the above
F) A) and C)

Question 5

Liquidity refers to

Accepted Answer

A)   the relation between the price and interest rate of an asset.
B)   the risk of an asset relative to its selling price.
C)   the ease with which an asset is converted into a medium of exchange.
D)   the sensitivity of investment spending to changes in the interest rate.E) A) and D)
F) None of the above

Question 6

In the long run,fiscal policy influences

Accepted Answer

A)   saving,investment,and growth;in the short run,fiscal policy primarily influences technology and the production function.
B)   saving,investment,and growth;in the short run,fiscal policy primarily influences the aggregate demand for goods and services.
C)   technology and the production function;in the short run,fiscal policy primarily influences saving,investment,and growth.
D)   the aggregate demand for goods and services;in the short run,fiscal policy primarily influences technology and the production function.E) B) and D)
F) C) and D)

Question 7

How does a reduction in the money supply by the Fed make owning stocks less attractive?

Accepted Answer

The reduction in the money supply raises...

Question 8

The lag problem associated with monetary policy is due mostly to

Accepted Answer

A)   the fact that business firms make investment plans far in advance.
B)   the political system of checks and balances that slows down the process of determining monetary policy.
C)   the time it takes for changes in government spending to affect the interest rate.
D)   All of the above are correct.E) All of the above
F) None of the above

Question 9

An increase in government purchases is likely to

Accepted Answer

A)   decrease interest rates.
B)   result in a net decrease in aggregate demand.
C)   crowd out investment spending by business firms.
D)   decrease money demand.E) C) and D)
F) None of the above

Question 10

According to liquidity preference theory,if the price level increases,then the equilibrium interest rate

Accepted Answer

A)   rises and the aggregate quantity of goods demanded rises.
B)   rises and the aggregate quantity of goods demanded falls.
C)   falls and the aggregate quantity of goods demanded rises.
D)   falls and the aggregate quantity of goods demanded falls.E) None of the above
F) C) and D)

Question 11

Who asserted that "the Federal Reserve's job is to take away the punch bowl just as the party gets going?"

Accepted Answer

A)   president George W.Bush
B)   president John F.Kennedy
C)   economist John Maynard Keynes
D)   former chairman of the Federal Reserve System William McChesney MartinE) A) and B)
F) B) and D)

Question 12

It is likely that a constitutional amendment that required the government always to run a balanced budget would

Accepted Answer

A)   contribute to a more stable level of output.
B)   mitigate the crowding-out effect.
C)   eliminate the economy's automatic stabilizers.
D)   All of the above are correct.E) All of the above
F) C) and D)

Question 13

Which of the following events shifts aggregate demand rightward?

Accepted Answer

A)   an increase in government expenditures or a decrease in the price level
B)   a decrease in government expenditures or an increase in the price level
C)   an increase in government expenditures,but not a change in the price level
D)   a decrease in the price level,but not an increase in government expendituresE) A) and D)
F) B) and C)

Question 14

Critics of stabilization policy argue that

Accepted Answer

A)   there is a lag between the time policy is passed and the time policy has an impact on the economy.
B)   the impact of policy may last longer than the problem it was designed to offset.
C)   policy can be a source of,instead of a cure for,economic fluctuations.
D)   All of the above are correct.E) A) and B)
F) A) and C)

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

In a certain economy,when income is $100,consumer spending is $60.The value of the multiplier for this economy is 3.It follows that,when income is $101,consumer spending is

Correct Answer
verified

Which of the following policies would be advocated by someone who wants the government to follow an active stabilization policy when the economy is experiencing severe unemployment?

Correct Answer
verified

It is likely that a constitutional amendment that required the government always to run a balanced budget would

Correct Answer
verified

How does a reduction in the money supply by the Fed make owning stocks less attractive?

Correct Answer
verified
The reduction in the money supply raises...
View Answer

Which of the following events shifts aggregate demand rightward?

Correct Answer
verified

Who asserted that "the Federal Reserve's job is to take away the punch bowl just as the party gets going?"

Correct Answer
verified

The wealth effect stems from the idea that a higher price level

Correct Answer
verified

The lag problem associated with monetary policy is due mostly to

Correct Answer
verified

In the long run,fiscal policy influences

Correct Answer
verified

In the short run,an increase in government expenditures

Correct Answer
verified

According to liquidity preference theory,if the price level increases,then the equilibrium interest rate

Correct Answer
verified

An increase in government purchases is likely to

Correct Answer
verified

Critics of stabilization policy argue that

Correct Answer
verified

Liquidity refers to

Correct Answer
verified

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

In a certain economy,when income is $100,consumer spending is $60.The value of the multiplier for this economy is 3.It follows that,when income is $101,consumer spending is

Correct AnswerverifiedShow Answer

Which of the following policies would be advocated by someone who wants the government to follow an active stabilization policy when the economy is experiencing severe unemployment?

Correct AnswerverifiedShow Answer

It is likely that a constitutional amendment that required the government always to run a balanced budget would

Correct AnswerverifiedShow Answer

How does a reduction in the money supply by the Fed make owning stocks less attractive?

Correct AnswerverifiedThe reduction in the money supply raises...View AnswerShow Answer

Which of the following events shifts aggregate demand rightward?

Correct AnswerverifiedShow Answer

Who asserted that "the Federal Reserve's job is to take away the punch bowl just as the party gets going?"

Correct AnswerverifiedShow Answer

The wealth effect stems from the idea that a higher price level

Correct AnswerverifiedShow Answer

The lag problem associated with monetary policy is due mostly to

Correct AnswerverifiedShow Answer

In the long run,fiscal policy influences

Correct AnswerverifiedShow Answer

In the short run,an increase in government expenditures

Correct AnswerverifiedShow Answer

According to liquidity preference theory,if the price level increases,then the equilibrium interest rate

Correct AnswerverifiedShow Answer

An increase in government purchases is likely to

Correct AnswerverifiedShow Answer

Critics of stabilization policy argue that

Correct AnswerverifiedShow Answer

Liquidity refers to

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The reduction in the money supply raises...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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