Question 1

In 1961,President John F.Kennedy,acting upon advice from his economists,proposed tax cuts.The advice he received

Accepted Answer

A)   was opposed to the teaching of Keynes,who had taught that tax cuts were counterproductive.
B)   was opposed to the teaching of Keynes,who had taught that all attempts to stabilize the economy were futile.
C)   came from economists who had studied Keynes's ideas when those ideas were only a few years old.
D)   came from economists who were unaware of Keynes's ideas because those ideas had not yet been widely disseminated at that time.E) None of the above
F) A) and C)

Question 2

Which among the following assets is the most liquid?

Accepted Answer

A)   capital goods
B)   stocks and bonds with a low risk
C)   real estate
D)   funds in a checking accountE) A) and D)
F) None of the above

Question 3

If the government cuts the tax rate,workers get to keep

Accepted Answer

A)   less of each additional dollar they earn,so work effort increases,and aggregate supply shifts right.
B)   less of each additional dollar they earn,so work effort decreases,and aggregate supply shifts left.
C)   more of each additional dollar they earn,so work effort increases,and aggregate supply shifts right.
D)   more of each additional dollar they earn,so work effort decreases,and aggregate supply shifts left.E) A) and B)
F) A) and C)

Question 4

The crowding-out effect occurs because an increase in government spending _____ interest rates,causing _____ to fall.

Accepted Answer

increases,...

Question 5

If the Federal Reserve's goal is to stabilize aggregate demand,then it will _____ the money supply in response to a stock market boom.This causes interest rates to _____.

Accepted Answer

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

Question 6

The interest rate would fall and the quantity of money demanded would

Accepted Answer

A)   increase if there were a surplus in the money market.
B)   increase if there were a shortage in the money market.
C)   decrease if there were a surplus in the money market.
D)   decrease if there were a shortage in the money market.E) All of the above
F) A) and D)

Question 7

The potential positive feedback that government spending may have on investment is know as the _____.The potential negative effect that government spending may have on investment is know as the _____ effect.

Accepted Answer

investment...

Question 8

If the Fed conducts open-market sales,which of the following quantities increase(s) ?

Accepted Answer

A)   interest rates,prices,and investment spending
B)   interest rates and prices,but not investment spending
C)   interest rates and investment,but not prices
D)   interest rates,but not investment or pricesE) B) and C)
F) A) and B)

Question 9

According to classical macroeconomic theory,

Accepted Answer

A)   the price level is sticky in the short run and it plays only a minor role in the short-run adjustment process.
B)   for any given level of output,the interest rate adjusts to balance the supply of,and demand for,money.
C)   output is determined by the supplies of capital and labor and the available production technology.
D)   All of the above are correct.E) A) and B)
F) All of the above

Question 10

People will want to hold less money if the price level

Accepted Answer

A)   increases or if the interest rate increases.
B)   decreases or if the interest rate decreases.
C)   increases or if the interest rate decreases.
D)   decreases or if the interest rate increases.E) C) and D)
F) A) and D)

Question 11

Other things the same,as the price level rises,

Accepted Answer

A)   the interest rate rises causing aggregate demand to shift.
B)   the interest rate rises causing a movement along a given aggregate-demand curve.
C)   the interest rate falls causing aggregate demand to shift.
D)   the interest rate falls causing a movement along a given aggregate-demand curve.E) All of the above
F) B) and D)

Question 12

If the multiplier is 6.25,then the MPC is

Accepted Answer

A)   0.2.
B)   0.6.
C)   0.75.
D)   0.84.E) A) and C)
F) B) and D)

Question 13

According to the theory of liquidity preference,

Accepted Answer

A)   if the interest rate is below the equilibrium level,then the quantity of money people want to hold is less than the quantity of money the Fed has created.
B)   if the interest rate is above the equilibrium level,then the quantity of money people want to hold is greater than the quantity of money the Fed has created.
C)   the demand for money is represented by a downward-sloping line on a supply-and-demand graph.
D)   All of the above are correct.E) A) and C)
F) None of the above

Question 14

Which of the following statements is correct for the short run?

Accepted Answer

A)   Output is determined by the amount of capital,labor,and technology;the interest rate adjusts to balance the supply and demand for money;the price level adjusts to balance the supply and demand for loanable funds.
B)   Output is determined by the amount of capital,labor,and technology;the interest rate adjusts to balance the supply and demand for loanable funds;the price level adjusts to balance the supply and demand for money.
C)   Output responds to the aggregate demand for goods and services;the interest rate adjusts to balance the supply and demand for money;the price level is relatively slow to adjust.
D)   Output responds to the aggregate demand for goods and services;the interest rate adjusts to balance the supply and demand for loanable funds;the price level adjusts to balance the supply and demand for money.E) B) and D)
F) B) and C)

Question 15

If the marginal propensity to consume is 5/6,and there is no investment accelerator or crowding out,a $20 billion increase in government expenditures would shift the aggregate demand curve right by

Accepted Answer

A)   $60 billion,but the effect would be larger if there were an investment accelerator.
B)   $60 billion,but the effect would be smaller if there were an investment accelerator.
C)   $120 billion,but the effect would be larger if there were an investment accelerator.
D)   $120 billion,but the effect would be smaller if there were an investment accelerator.E) None of the above
F) A) and D)

Question 16

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.E) None of the above
F) C) and D)

Question 17

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 to Y2 is explained as follows: A)  The Federal Reserve increases the money supply,causing the money-demand curve to shift from MD1 to MD2;this shift of MD causes r to increase from r1 to r2;and this increase in r causes Y to decrease from Y1 to Y2. B)  An increase in P from P1 to P2 causes the money-demand curve to shift from MD1 to MD2;this shift of MD causes r to increase from r1 to r2;and this increase in r causes Y to decrease from Y1 to Y2. C)  A decrease in P from P2 to P1 causes the money-demand curve to shift from MD1 to MD2;this shift of MD causes r to increase from r1 to r2;and this increase in r causes Y to decrease from Y1 to Y2. D)  An increase in the price level causes the money-demand curve to shift from MD2 to MD1;this shift of MD causes r to decrease from r2 to r1;and this decrease in r causes Y to decrease from Y1 to Y2." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 21-2.A decrease in Y from Y1 to Y2 is explained as follows:

Accepted Answer

A)   The Federal Reserve increases the money supply,causing the money-demand curve to shift from MD1 to MD2;this shift of MD causes r to increase from r1 to r2;and this increase in r causes Y to decrease from Y1 to Y2.
B)   An increase in P from P1 to P2 causes the money-demand curve to shift from MD1 to MD2;this shift of MD causes r to increase from r1 to r2;and this increase in r causes Y to decrease from Y1 to Y2.
C)   A decrease in P from P2 to P1 causes the money-demand curve to shift from MD1 to MD2;this shift of MD causes r to increase from r1 to r2;and this increase in r causes Y to decrease from Y1 to Y2.
D)   An increase in the price level causes the money-demand curve to shift from MD2 to MD1;this shift of MD causes r to decrease from r2 to r1;and this decrease in r causes Y to decrease from Y1 to Y2.E) B) and D)
F) A) and C)

Question 18

Which of the following effects results from the change in the interest rate created by an increase in government spending?

Accepted Answer

A)   the investment accelerator and crowding out
B)   the investment accelerator but not crowding out
C)   crowding out but not the investment accelerator
D)   neither crowding out nor the investment acceleratorE) A) and B)
F) B) and C)

Question 19

Suppose foreigners find U.S.goods and services more desirable for some reason other than a change in the exchange rate.Which policies could be used to offset the resulting change in output?

Accepted Answer

A)   an increase in the money supply and an increase in taxes
B)   an increase in the money supply and a decrease in taxes
C)   a decrease in the money supply and an increase in taxes
D)   a decrease in the money supply and a decrease in taxesE) C) and D)
F) B) and C)

Question 20

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) All of the above
F) A) and D)

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

If the multiplier is 6.25,then the MPC is

Correct Answer
verified

Suppose foreigners find U.S.goods and services more desirable for some reason other than a change in the exchange rate.Which policies could be used to offset the resulting change in output?

Correct Answer
verified

In the long run,fiscal policy influences

Correct Answer
verified

If the Fed conducts open-market sales,which of the following quantities increase(s) ?

Correct Answer
verified

People will want to hold less money if the price level

Correct Answer
verified

According to classical macroeconomic theory,

Correct Answer
verified

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

Correct Answer
verified

If the marginal propensity to consume is 5/6,and there is no investment accelerator or crowding out,a $20 billion increase in government expenditures would shift the aggregate demand curve right by

Correct Answer
verified

Correct Answer
verified

Which of the following statements is correct for the short run?

Correct Answer
verified

Which among the following assets is the most liquid?

Correct Answer
verified

The crowding-out effect occurs because an increase in government spending _ interest rates,causing _ to fall.

Correct Answer
verified
increases,...
View Answer

Which of the following effects results from the change in the interest rate created by an increase in government spending?

Correct Answer
verified

In 1961,President John F.Kennedy,acting upon advice from his economists,proposed tax cuts.The advice he received

Correct Answer
verified

If the government cuts the tax rate,workers get to keep

Correct Answer
verified

If the Federal Reserve's goal is to stabilize aggregate demand,then it will _ the money supply in response to a stock market boom.This causes interest rates to _.

Correct Answer
verified

The potential positive feedback that government spending may have on investment is know as the _.The potential negative effect that government spending may have on investment is know as the _ effect.

Correct Answer
verified
investment...
View Answer

The interest rate would fall and the quantity of money demanded would

Correct Answer
verified

According to the theory of liquidity preference,

Correct Answer
verified

Other things the same,as the price level rises,

Correct Answer
verified

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

If the multiplier is 6.25,then the MPC is

Correct AnswerverifiedShow Answer

Suppose foreigners find U.S.goods and services more desirable for some reason other than a change in the exchange rate.Which policies could be used to offset the resulting change in output?

Correct AnswerverifiedShow Answer

In the long run,fiscal policy influences

Correct AnswerverifiedShow Answer

If the Fed conducts open-market sales,which of the following quantities increase(s) ?

Correct AnswerverifiedShow Answer

People will want to hold less money if the price level

Correct AnswerverifiedShow Answer

According to classical macroeconomic theory,

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the marginal propensity to consume is 5/6,and there is no investment accelerator or crowding out,a $20 billion increase in government expenditures would shift the aggregate demand curve right by

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following statements is correct for the short run?

Correct AnswerverifiedShow Answer

Which among the following assets is the most liquid?

Correct AnswerverifiedShow Answer

The crowding-out effect occurs because an increase in government spending _____ interest rates,causing _____ to fall.

Correct Answerverifiedincreases,...View AnswerShow Answer

Which of the following effects results from the change in the interest rate created by an increase in government spending?

Correct AnswerverifiedShow Answer

In 1961,President John F.Kennedy,acting upon advice from his economists,proposed tax cuts.The advice he received

Correct AnswerverifiedShow Answer

If the government cuts the tax rate,workers get to keep

Correct AnswerverifiedShow Answer

If the Federal Reserve's goal is to stabilize aggregate demand,then it will _____ the money supply in response to a stock market boom.This causes interest rates to _____.

Correct AnswerverifiedShow Answer

The potential positive feedback that government spending may have on investment is know as the _____.The potential negative effect that government spending may have on investment is know as the _____ effect.

Correct Answerverifiedinvestment...View AnswerShow Answer

The interest rate would fall and the quantity of money demanded would

Correct AnswerverifiedShow Answer

According to the theory of liquidity preference,

Correct AnswerverifiedShow Answer

Other things the same,as the price level rises,

Correct AnswerverifiedShow Answer

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The crowding-out effect occurs because an increase in government spending _ interest rates,causing _ to fall.

Correct Answer
verified
increases,...
View Answer

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verified

Correct Answer
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Correct Answer
verified

If the Federal Reserve's goal is to stabilize aggregate demand,then it will _ the money supply in response to a stock market boom.This causes interest rates to _.

Correct Answer
verified

The potential positive feedback that government spending may have on investment is know as the _.The potential negative effect that government spending may have on investment is know as the _ effect.

Correct Answer
verified
investment...
View Answer

Correct Answer
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