Question 1

The Kennedy tax cut of 1964 was

Accepted Answer

A)   successful in stimulating the economy.
B)   designed to shift the aggregate demand curve to the right.
C)   designed to shift the aggregate supply curve to the right.
D)   All of the above are correct.E) A) and C)
F) A) and B)

Question 2

If the MPC is 3/4 then the multiplier is

Accepted Answer

A)   4,so a $100 increase in government spending increases aggregate demand by $400.
B)   4,so a $100 increase in government spending increases output by $400.
C)   4/3,so a $100 increase in government spending increases aggregate demand by $400/3.
D)   4/3,so a $100 increase in government spending increases output by $400/3.E) B) and C)
F) None of the above

Question 3

Which among the following assets is the most liquid?

Accepted Answer

A)   corporate bonds
B)   fine art
C)   deposits that can be withdrawn using ATMs
D)   shares of stockE) B) and D)
F) C) and D)

Question 4

The Federal Funds rate is the interest rate

Accepted Answer

A)   banks charge each other for short-term loans.
B)   the Fed charges depository institutions for short-term loans.
C)   the Fed pays on deposits.
D)   interest rate on 3 month Treasury bills.E) B) and D)
F) C) and D)

Question 5

"Monetary policy can be described either in terms of the money supply or in terms of the interest rate." This statement amounts to the assertion that

Accepted Answer

A)   rightward shifts of the money-supply curve cannot occur if the Federal Reserve decides to target an interest rate.
B)   the activities of the Federal Reserve's bond traders are irrelevant if the Federal Reserve decides to target an interest rate.
C)   changes in monetary policy aimed at expanding aggregate demand can be described either as increasing the money supply or as increasing the interest rate.
D)   our analysis of monetary policy is not fundamentally altered if the Federal Reserve decides to target an interest rate.E) B) and C)
F) A) and D)

Question 6

The idea that expansionary fiscal policy has a positive affect on investment is known as

Accepted Answer

A)   monetary policy.
B)   crowding out.
C)   the investment accelerator.
D)   the multiplier.E) None of the above
F) A) and B)

Question 7

According to the theory of liquidity preference,which variable adjusts to balance the supply and demand for money?

Accepted Answer

A)   interest rate
B)   money supply
C)   quantity of output
D)   price levelE) A) and C)
F) B) and C)

Question 8

According to liquidity preference theory,

Accepted Answer

A)   an increase in the interest rate reduces the quantity of money demanded.This is shown as a movement along the money-demand curve.An increase in the price level shifts money demand to the right.
B)   an increase in the interest rate increases the quantity of money demanded.This is shown as a movement along the money-demand curve.An increase in the price level shifts money demand leftward.
C)   an increase in the price level reduces the quantity of money demanded.This is shown as a movement along the money-demand curve.An increase in the interest rate shifts money demand rightward.
D)   an increase in the price level increases the quantity of money demanded.This is shown as a movement along the money-demand curve.An increase in the interest rate shifts money demand leftward.E) C) and D)
F) B) and D)

Question 9

A 2009 article in The Economist noted that

Accepted Answer

A)   recent research has allowed economists to estimate the values of fiscal multipliers with a great deal of precision.
B)   research on multipliers indicates that multipliers for permanent tax cuts tend to be smaller than multipliers for temporary tax cuts.
C)   most of the evidence on multipliers for government spending is based on changes in military expenditures.
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 10

Supply-side economists believe that a reduction in the tax rate

Accepted Answer

A)   always decrease government tax revenue.
B)   shifts the aggregate supply curve to the right.
C)   provides no incentive for people to work more.
D)   would decrease consumption.E) B) and C)
F) A) and D)

Question 11

In a certain economy,when income is $400,consumer spending is $350.The value of the multiplier for this economy is 3.125.It follows that,when income is $450,consumer spending is

Accepted Answer

A)   $384.For this economy,an initial impulse of $50 in consumer spending translates into a $146.67 increase in aggregate demand.
B)   $384.For this economy,an initial impulse of $50 in consumer spending translates into a $156.25 increase in aggregate demand.
C)   $389.38.For this economy,an initial impulse of $50 in consumer spending translates into a $146.67 increase in aggregate demand.
D)   $389.38.For this economy,an initial impulse of $50 in consumer spending translates into a $156.25 increase in aggregate demand.E) B) and D)
F) None of the above

Question 12

Use the money market to explain the interest-rate effect and its relation to the slope of the aggregate demand curve.

Accepted Answer

When the price level falls,people need l...

Question 13

Changes in the interest rate

Accepted Answer

A)   shift aggregate demand whether they are caused by changes in the price level or by changes in fiscal or monetary policy.
B)   shift aggregate demand if they are caused by changes in the price level,but not if they are caused by changes in fiscal or monetary policy.
C)   shift aggregate demand if they are caused by fiscal or monetary policy,but not if they are caused by changes in the price level.
D)   do not shift aggregate demand.E) C) and D)
F) B) and D)

Question 14

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.
 2 than it is at Y1. B)  the quantity of money is the same at Y1 as it is at Y2. C)  the price level is higher at r2 than it is at r1. D)  All of the above are correct." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 21-2.Assume the money market is always in equilibrium.Under the assumptions of the model,

Accepted Answer

A)   the real interest rate is higher at Y2 than it is at Y1.
B)   the quantity of money is the same at Y1 as it is at Y2.
C)   the price level is higher at r2 than it is at r1.
D)   All of the above are correct.E) B) and C)
F) A) and D)

Question 15

The interest rate that the Federal Reserve pays banks on the reserves they hold is called the

Accepted Answer

A)   open-market rate.
B)   discount rate.
C)   preference rate.
D)   None of the above are correct.E) C) and D)
F) A) and C)

Question 16

An increase in the money supply shifts the aggregate-supply curve to the right.

Accepted Answer

A) True 
 B)False

Question 17

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) A) and B)
F) C) and D)

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

When the Federal Reserve conducts an open-market purchase,the money supply _____ and aggregate demand _____.

Accepted Answer

The answer of When the Federal Reserve conducts an open-market...

Question 20

In response to the sharp decline in stock prices in October 1987,the Federal Reserve

Accepted Answer

A)   increased the money supply and increased interest rates.
B)   increased the money supply and decreased interest rates.
C)   decreased the money supply and increased interest rates.
D)   decreased the money supply and decreased interest rates.E) B) and D)
F) None of the above

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

The idea that expansionary fiscal policy has a positive affect on investment is known as

Correct Answer
verified

The Federal Funds rate is the interest rate

Correct Answer
verified

Which among the following assets is the most liquid?

Correct Answer
verified

In response to the sharp decline in stock prices in October 1987,the Federal Reserve

Correct Answer
verified

Supply-side economists believe that a reduction in the tax rate

Correct Answer
verified

If the MPC is 3/4 then the multiplier is

Correct Answer
verified

When the Federal Reserve conducts an open-market purchase,the money supply _ and aggregate demand _.

Correct Answer
verified

Use the money market to explain the interest-rate effect and its relation to the slope of the aggregate demand curve.

Correct Answer
verified
When the price level falls,people need l...
View Answer

The interest rate that the Federal Reserve pays banks on the reserves they hold is called the

Correct Answer
verified

Changes in the interest rate

Correct Answer
verified

A 2009 article in The Economist noted that

Correct Answer
verified

In a certain economy,when income is $400,consumer spending is $350.The value of the multiplier for this economy is 3.125.It follows that,when income is $450,consumer spending is

Correct Answer
verified

The Kennedy tax cut of 1964 was

Correct Answer
verified

An increase in the money supply shifts the aggregate-supply curve to the right.

Correct Answer
verified

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

Correct Answer
verified

According to the theory of liquidity preference,which variable adjusts to balance the supply and demand for money?

Correct Answer
verified

According to liquidity preference theory,

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

"Monetary policy can be described either in terms of the money supply or in terms of the interest rate." This statement amounts to the assertion that

Correct Answer
verified

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

The idea that expansionary fiscal policy has a positive affect on investment is known as

Correct AnswerverifiedShow Answer

The Federal Funds rate is the interest rate

Correct AnswerverifiedShow Answer

Which among the following assets is the most liquid?

Correct AnswerverifiedShow Answer

In response to the sharp decline in stock prices in October 1987,the Federal Reserve

Correct AnswerverifiedShow Answer

Supply-side economists believe that a reduction in the tax rate

Correct AnswerverifiedShow Answer

If the MPC is 3/4 then the multiplier is

Correct AnswerverifiedShow Answer

When the Federal Reserve conducts an open-market purchase,the money supply _____ and aggregate demand _____.

Correct AnswerverifiedShow Answer

Use the money market to explain the interest-rate effect and its relation to the slope of the aggregate demand curve.

Correct AnswerverifiedWhen the price level falls,people need l...View AnswerShow Answer

The interest rate that the Federal Reserve pays banks on the reserves they hold is called the

Correct AnswerverifiedShow Answer

Changes in the interest rate

Correct AnswerverifiedShow Answer

A 2009 article in The Economist noted that

Correct AnswerverifiedShow Answer

In a certain economy,when income is $400,consumer spending is $350.The value of the multiplier for this economy is 3.125.It follows that,when income is $450,consumer spending is

Correct AnswerverifiedShow Answer

The Kennedy tax cut of 1964 was

Correct AnswerverifiedShow Answer

An increase in the money supply shifts the aggregate-supply curve to the right.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

According to the theory of liquidity preference,which variable adjusts to balance the supply and demand for money?

Correct AnswerverifiedShow Answer

According to liquidity preference theory,

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

"Monetary policy can be described either in terms of the money supply or in terms of the interest rate." This statement amounts to the assertion that

Correct AnswerverifiedShow Answer

Correct Answer
verified

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When the Federal Reserve conducts an open-market purchase,the money supply _ and aggregate demand _.

Correct Answer
verified

Correct Answer
verified
When the price level falls,people need l...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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