Question 1

Figure 21-2.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 21-2.If the money-supply curve MS on the left-hand graph were to shift to the right,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) A) and B)
F) B) and C)

Question 2

Figure 21-7. 
-Refer to Figure 21-7.If the economy is at point b,a policy to restore full employment would be

Accepted Answer

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

Question 3

Which of the following events would shift money demand to the right?

Accepted Answer

A)   an increase in the interest rate or an increase in the price level
B)   an increase in the interest rate,but not an increase in the price level
C)   an increase in the price level,but not an increase in the interest rate
D)   neither an increase in the interest rate nor an increase in the price levelE) A) and B)
F) A) and C)

Question 4

Figure 21-2.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.
 1 = 0.08;r2 = 0.12;Y1 = 13,000;Y2 = 10,000;P1 = 1.0;and P2 = 1.2.Which of the following statements is correct? A)  When r = r2,nominal output is higher than it is when r = r1. B)  When r = r2,real output is higher than it is when r = r1. C)  When r = r2,the expected rate of inflation is higher than it is when r = r1. D)  If the velocity of money is 4 when r = r2,then the quantity of money is $3,000." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 21-2.Assume the money market is always in equilibrium,and suppose r1 = 0.08;r2 = 0.12;Y1 = 13,000;Y2 = 10,000;P1 = 1.0;and P2 = 1.2.Which of the following statements is correct?

Accepted Answer

A)   When r = r2,nominal output is higher than it is when r = r1.
B)   When r = r2,real output is higher than it is when r = r1.
C)   When r = r2,the expected rate of inflation is higher than it is when r = r1.
D)   If the velocity of money is 4 when r = r2,then the quantity of money is $3,000.E) C) and D)
F) B) and D)

Question 5

Because the liquidity-preference framework focuses on the

Accepted Answer

A)   short run,it assumes the price level adjusts to bring the money market to equilibrium.
B)   short run,it assumes the interest rate adjusts to bring the money market to equilibrium.
C)   long run,it assumes the price level adjusts to bring the money market to equilibrium.
D)   long run,it assumes the interest rate adjusts to bring the money market to equilibrium.E) C) and D)
F) All of the above

Question 6

Monetary policy and fiscal policy are the only factors that influence aggregate demand.

Accepted Answer

A) True 
 B)False

Question 7

To stabilize interest rates,the Federal Reserve will respond to an increase in money demand by

Accepted Answer

A)   buying government bonds,which decreases the supply of money.
B)   selling government bonds,which increases the supply of money.
C)   buying government bonds,which increases the supply of money.
D)   selling government bonds,which decreases the supply of money.E) A) and B)
F) C) and D)

Question 8

Most economists believe that fiscal policy

Accepted Answer

A)   only affects aggregate demand and not aggregate supply.
B)   primarily affects aggregate demand.
C)   primarily effects aggregate supply.
D)   only affects aggregate supply and not aggregate demand.E) C) and D)
F) B) and D)

Question 9

Assume there is a multiplier effect,some crowding out,and no accelerator effect.An increase in government expenditures changes aggregate demand more,

Accepted Answer

A)   the smaller the MPC and the stronger the influence of income on money demand.
B)   the smaller the MPC and the weaker the influence of income on money demand.
C)   the larger the MPC and the stronger the influence of income on money demand.
D)   the larger the MPC and the weaker the influence of income on money demand.E) C) and D)
F) B) and C)

Question 10

The ease with which an asset can be converted into the medium of exchange is known as _____.

Accepted Answer

The answer of The ease with which an asset can...

Question 11

The interest-rate effect is partially explained by the fact that a higher price level reduces money demand.

Accepted Answer

A) True 
 B)False

Question 12

When households decide to hold more money,

Accepted Answer

A)   interest rates fall and investment decreases.
B)   interest rates fall and investment increases.
C)   interest rates rise and investment increases.
D)   interest rates rise and investment decreases.E) B) and D)
F) None of the above

Question 13

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

Accepted Answer

A)   increase,and aggregate demand to shift right.
B)   increase,and aggregate demand to shift left.
C)   decrease,and aggregate demand to shift right.
D)   decrease,and aggregate demand to shift left.E) B) and D)
F) All of the above

Question 14

Which of the following properly describes the interest-rate effect that helps explain the slope of the aggregate-demand curve?

Accepted Answer

A)   As the money supply increases,the interest rate falls,so spending rises.
B)   As the money supply increases,the interest rate rises,so spending falls.
C)   As the price level increases,the interest rate falls,so spending rises.
D)   As the price level increases,the interest rate rises,so spending falls.E) A) and D)
F) A) and B)

Question 15

People will want to hold more money if the price level

Accepted Answer

A)   or if the interest rate increases.
B)   or if the interest rate decreases.
C)   increases or if the interest rate decreases.
D)   decreases or if the interest rate increases.E) None of the above
F) A) and B)

Question 16

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.E) A) and B)
F) A) and D)

Question 17

Suppose there were a large decline in net exports.If the Fed wanted to stabilize output,it could

Accepted Answer

A)   buy bonds to raise interest rates.
B)   buy bonds to lower interest rates.
C)   sell bonds to raise interest rates.
D)   sell bonds to lower interest rates.E) A) and B)
F) All of the above

Question 18

The goal of stabilization policy is to stabilize aggregate _____.As a result,stabilization policy will also stabilize _____ and _____.

Accepted Answer

demand,out...

Question 19

Liquidity preference theory is most relevant to the

Accepted Answer

A)   short run and supposes that the price level adjusts to bring money supply and money demand into balance.
B)   short run and supposes that the interest rate adjusts to bring money supply and money demand into balance.
C)   long run and supposes that the price level adjusts to bring money supply and money demand into balance.
D)   long run and supposes that the interest rate adjusts to bring money supply and money demand into balance.E) B) and C)
F) None of the above

Question 20

If the Federal Reserve increases the money supply,then initially people want to

Accepted Answer

A)   sell bonds so the interest rate rises.
B)   sell bonds so the interest rate falls.
C)   buy bonds so the interest rate rises.
D)   buy bonds so the interest rate falls.E) A) and D)
F) B) and D)

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

The goal of stabilization policy is to stabilize aggregate ___.As a result,stabilization policy will also stabilize _ and ___.

Correct Answer
verified
demand,out...
View Answer

Because the liquidity-preference framework focuses on the

Correct Answer
verified

To stabilize interest rates,the Federal Reserve will respond to an increase in money demand by

Correct Answer
verified

The ease with which an asset can be converted into the medium of exchange is known as _____.

Correct Answer
verified

Which of the following events would shift money demand to the right?

Correct Answer
verified

Which of the following properly describes the interest-rate effect that helps explain the slope of the aggregate-demand curve?

Correct Answer
verified

Liquidity preference theory is most relevant to the

Correct Answer
verified

Figure 21-7. -Refer to Figure 21-7.If the economy is at point b,a policy to restore full employment would be

Correct Answer
verified

If the Federal Reserve increases the money supply,then initially people want to

Correct Answer
verified

Most economists believe that fiscal policy

Correct Answer
verified

People will want to hold more money if the price level

Correct Answer
verified

Other things the same,automatic stabilizers tend to

Correct Answer
verified

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

Correct Answer
verified

Assume there is a multiplier effect,some crowding out,and no accelerator effect.An increase in government expenditures changes aggregate demand more,

Correct Answer
verified

Suppose there were a large decline in net exports.If the Fed wanted to stabilize output,it could

Correct Answer
verified

Correct Answer
verified

The interest-rate effect is partially explained by the fact that a higher price level reduces money demand.

Correct Answer
verified

Monetary policy and fiscal policy are the only factors that influence aggregate demand.

Correct Answer
verified

Correct Answer
verified

When households decide to hold more money,

Correct Answer
verified

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

The goal of stabilization policy is to stabilize aggregate _____.As a result,stabilization policy will also stabilize _____ and _____.

Correct Answerverifieddemand,out...View AnswerShow Answer

Because the liquidity-preference framework focuses on the

Correct AnswerverifiedShow Answer

To stabilize interest rates,the Federal Reserve will respond to an increase in money demand by

Correct AnswerverifiedShow Answer

The ease with which an asset can be converted into the medium of exchange is known as _____.

Correct AnswerverifiedShow Answer

Which of the following events would shift money demand to the right?

Correct AnswerverifiedShow Answer

Which of the following properly describes the interest-rate effect that helps explain the slope of the aggregate-demand curve?

Correct AnswerverifiedShow Answer

Liquidity preference theory is most relevant to the

Correct AnswerverifiedShow Answer

Figure 21-7. -Refer to Figure 21-7.If the economy is at point b,a policy to restore full employment would be

Correct AnswerverifiedShow Answer

If the Federal Reserve increases the money supply,then initially people want to

Correct AnswerverifiedShow Answer

Most economists believe that fiscal policy

Correct AnswerverifiedShow Answer

People will want to hold more money if the price level

Correct AnswerverifiedShow Answer

Other things the same,automatic stabilizers tend to

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Assume there is a multiplier effect,some crowding out,and no accelerator effect.An increase in government expenditures changes aggregate demand more,

Correct AnswerverifiedShow Answer

Suppose there were a large decline in net exports.If the Fed wanted to stabilize output,it could

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The interest-rate effect is partially explained by the fact that a higher price level reduces money demand.

Correct AnswerverifiedShow Answer

Monetary policy and fiscal policy are the only factors that influence aggregate demand.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When households decide to hold more money,

Correct AnswerverifiedShow Answer

The goal of stabilization policy is to stabilize aggregate ___.As a result,stabilization policy will also stabilize _ and ___.

Correct Answer
verified
demand,out...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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