Question 1

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

Question 2

Tax cuts

Accepted Answer

A)  and increases in government expenditures shift aggregate demand right.
B)  and increases in government expenditures shift aggregate demand left.
C)  shift aggregate demand right while increases in government expenditures shift aggregate demand left.
D)  shift aggregate demand left while increases in government expenditures shift aggregate demand right.E) A) and C)
F) A) and B)

Question 3

If the MPC = .85,then the government purchases multiplier is about

Accepted Answer

A)  1.18.
B)  3.33.
C)  6.67.
D)  8.5.E) B) and D)
F) A) and B)

Question 4

Assuming crowding-out but no multiplier or investment-accelerator effects,a $100 billion increase in government expenditures shifts aggregate

Accepted Answer

A)  demand right by more than $100 billion.
B)  demand right by less than $100 billion.
C)  supply left by more than $100 billion.
D)  supply left by less than $100 billion.E) C) and D)
F) All of the above

Question 5

For the most part,fiscal policy affects the economy in the short run while monetary policy primarily matters in the long run.

Accepted Answer

A) True 
 B)False

Question 6

Suppose the MPC is .75.There are no crowding out or investment accelerator effects.If the government increases expenditures by $200 billion how far does aggregate demand shift? If the government decreases taxes by $200 billion how far does aggregate demand shift?

Accepted Answer

A)  $800 billion and $800 billion
B)  $800 billion and $600 billion
C)  $600 billion and $600 billion
D)  $600 billion and $450 billionE) A) and D)
F) None of the above

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

Question 8

When the Fed decreases the money supply we expect

Accepted Answer

A)  interest rates and stock prices to rise.
B)  interest rates and stock prices to fall.
C)  interest rates to rise and stock prices to fall.
D)  interest rates to fall and stock prices to rise.E) B) and C)
F) C) and D)

Question 9

If the Federal Reserve decided to lower interest rates,it could

Accepted Answer

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

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

When the Fed decreases the money supply we expect

Correct Answer
verified

If the Federal Reserve decided to lower interest rates,it could

Correct Answer
verified

Tax cuts

Correct Answer
verified

For the most part,fiscal policy affects the economy in the short run while monetary policy primarily matters in the long run.

Correct Answer
verified

Assuming crowding-out but no multiplier or investment-accelerator effects,a $100 billion increase in government expenditures shifts aggregate

Correct Answer
verified

Suppose the MPC is .75.There are no crowding out or investment accelerator effects.If the government increases expenditures by $200 billion how far does aggregate demand shift? If the government decreases taxes by $200 billion how far does aggregate demand shift?

Correct Answer
verified

If the MPC = .85,then the government purchases multiplier is about

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

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

When the Fed decreases the money supply we expect

Correct AnswerverifiedShow Answer

If the Federal Reserve decided to lower interest rates,it could

Correct AnswerverifiedShow Answer

Tax cuts

Correct AnswerverifiedShow Answer

For the most part,fiscal policy affects the economy in the short run while monetary policy primarily matters in the long run.

Correct AnswerverifiedShow Answer

Assuming crowding-out but no multiplier or investment-accelerator effects,a $100 billion increase in government expenditures shifts aggregate

Correct AnswerverifiedShow Answer

Suppose the MPC is .75.There are no crowding out or investment accelerator effects.If the government increases expenditures by $200 billion how far does aggregate demand shift? If the government decreases taxes by $200 billion how far does aggregate demand shift?

Correct AnswerverifiedShow Answer

If the MPC = .85,then the government purchases multiplier is about

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

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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