Question 1

Other things the same, an increase in taxes shifts aggregate demand to the left. In the short run this makes output fall which makes the interest rate rise.

Accepted Answer

A) True 
 B)False

Question 2

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) B) and C)
F) All of the above

Question 3

Other things the same, during recessions taxes tend to

Accepted Answer

A)   rise. The rise in taxes stimulates aggregate demand.
B)   rise. The rise in taxes contracts aggregate demand.
C)   fall. The fall in taxes stimulates aggregate demand.
D)   fall. The fall in taxes contracts aggregate demand.E) A) and C)
F) C) and D)

Question 4

Figure 34-3 
-Refer to Figure 34-3. What quantity is represented by the downward-sloping line on the left-hand graph?

Accepted Answer

A)   the supply of money
B)   the demand for money
C)   the rate of inflation
D)   Aggregate Demand.E) A) and D)
F) B) and C)

Question 5

A decrease in government spending

Accepted Answer

A)   increases the interest rate and so investment spending increases.
B)   increases the interest rate and so decreases investment spending decreases.
C)   decreases the interest rate and so investment spending increases.
D)   decreases the interest rate and so investment spending decreases.E) A) and C)
F) A) and B)

Question 6

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) A) and B)
F) None of the above

Question 7

Automatic stabilizers

Accepted Answer

A)   increase the problems that lags cause in using fiscal policy as a stabilization tool.
B)   are changes in taxes or government spending that increase aggregate demand without requiring policy makers to act when the economy goes into recession.
C)   are changes in taxes or government spending that policy makers quickly agree to when the economy goes into recession.
D)   All of the above are correct.E) A) and C)
F) None of the above

Question 8

Which of the following shifts aggregate demand to the left?

Accepted Answer

A)   an increase in the price level
B)   an increase in the money supply
C)   a decrease in the price level
D)   a decrease in the money supplyE) B) and D)
F) C) and D)

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

Which of the following shifts aggregate demand to the left?

Correct Answer
verified

Other things the same, an increase in taxes shifts aggregate demand to the left. In the short run this makes output fall which makes the interest rate rise.

Correct Answer
verified

Figure 34-3 -Refer to Figure 34-3. What quantity is represented by the downward-sloping line on the left-hand graph?

Correct Answer
verified

Other things the same, automatic stabilizers tend to

Correct Answer
verified

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

Correct Answer
verified

Other things the same, during recessions taxes tend to

Correct Answer
verified

A decrease in government spending

Correct Answer
verified

Automatic stabilizers

Correct Answer
verified

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

Which of the following shifts aggregate demand to the left?

Correct AnswerverifiedShow Answer

Other things the same, an increase in taxes shifts aggregate demand to the left. In the short run this makes output fall which makes the interest rate rise.

Correct AnswerverifiedShow Answer

Figure 34-3 -Refer to Figure 34-3. What quantity is represented by the downward-sloping line on the left-hand graph?

Correct AnswerverifiedShow Answer

Other things the same, automatic stabilizers tend to

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Other things the same, during recessions taxes tend to

Correct AnswerverifiedShow Answer

A decrease in government spending

Correct AnswerverifiedShow Answer

Automatic stabilizers

Correct AnswerverifiedShow Answer

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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Correct Answer
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