Question 1

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

Accepted Answer

The answer of The potential positive feedback that government spending...

Question 2

To offset increased pessimism by households, the government may _____ government spending and/or _____ taxes.

Accepted Answer

The answer of To offset increased pessimism by households, the...

Question 3

What is the value of the multiplier if the marginal propensity to consume is 0.5?

Accepted Answer

The answer of What is the value of the multiplier...

Question 4

The idea that aggregate demand fluctuates due to irrational waves of pessimism by households and firms is known as _____.

Accepted Answer

The answer of The idea that aggregate demand fluctuates due...

Question 5

If the Federal Reserve's goal is to stabilize aggregate demand, then in response to an increase in money demand, the Federal Reserve will _____ the money supply.

Accepted Answer

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

Question 6

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 7

The additional shifts in aggregate demand that result when there is an increase in government spending is known as the _____.

Accepted Answer

The answer of The additional shifts in aggregate demand that...

Question 8

Permanent tax changes have a effect on aggregate demand compared to temporary tax changes.

Accepted Answer

The answer of Permanent tax changes have a effect on...

Question 9

Figure 34-10 
-Refer to Figure 34-10. Suppose the multiplier is 4 and the economy is currently at point A. An increase in government purchases of $10 will increase aggregate demand to $ if there is no crowding-out. If crowding- out exists, then aggregate demand will likely to increase to $ .

Accepted Answer

The answer of Figure 34-10 
-Refer to Figure 34-10. Suppose...

Question 10

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

Accepted Answer

The answer of The crowding-out effect occurs because an increase...

Question 11

To stabilize output, the Federal Reserve will the money supply when aggregate demand falls.

Accepted Answer

The answer of To stabilize output, the Federal Reserve will...

Question 12

Figure 34-10 
-Refer to Figure 34-10. Suppose the multiplier is 2 and there is no crowding-out, but there is an accelerator effect. If the economy is currently at point A, then an increase in government purchases of $10 will likely increase aggregate demand to point where output is $ .

Accepted Answer

The answer of Figure 34-10 
-Refer to Figure 34-10. Suppose...

Question 13

A decrease in taxes ____ aggregate demand through larger _____ by households.

Accepted Answer

The answer of A decrease in taxes ____ aggregate demand...

Question 14

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 15

Last year, total income increased $1,000 and consumption increased $800. An increase in government spending equal to $10 would cause output to increase by $_____ because the multiplier is ______.

Accepted Answer

The answer of Last year, total income increased $1,000 and...

Question 16

The government's choices regarding the overall level of government purchases and taxes is known as _____.

Accepted Answer

The answer of The government's choices regarding the overall level...

Question 17

An increase in taxes shifts the aggregate curve to the .

Accepted Answer

The answer of An increase in taxes shifts the aggregate...

Question 18

A European recession that reduces U.S. net exports by $50 billion may ultimately lead to a $_____ billion reduction in aggregate demand if the MPC is 0.75.

Accepted Answer

The answer of A European recession that reduces U.S. net...

Question 19

A decrease in taxes will shift aggregate demand to the _____, cause consumption to _____, and cause output to _____. Due to the crowding-out effect, investment will _____.

Accepted Answer

The answer of A decrease in taxes will shift aggregate...

Question 20

To reduce aggregate demand, the government may reduce or increase .

Accepted Answer

The answer of To reduce aggregate demand, the government may...

Quiz 21: The Influence of Monetary and Fiscal Policy on Aggregate Demand

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

To offset increased pessimism by households, the government may _ government spending and/or _ taxes.

What is the value of the multiplier if the marginal propensity to consume is 0.5?

The idea that aggregate demand fluctuates due to irrational waves of pessimism by households and firms is known as _____.

If the Federal Reserve's goal is to stabilize aggregate demand, then in response to an increase in money demand, the Federal Reserve will _____ the money supply.

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 .

The additional shifts in aggregate demand that result when there is an increase in government spending is known as the _____.

Permanent tax changes have a effect on aggregate demand compared to temporary tax changes.

Figure 34-10 -Refer to Figure 34-10. Suppose the multiplier is 4 and the economy is currently at point A. An increase in government purchases of $10 will increase aggregate demand to $ if there is no crowding-out. If crowding- out exists, then aggregate demand will likely to increase to $ .

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

To stabilize output, the Federal Reserve will the money supply when aggregate demand falls.

Figure 34-10 -Refer to Figure 34-10. Suppose the multiplier is 2 and there is no crowding-out, but there is an accelerator effect. If the economy is currently at point A, then an increase in government purchases of $10 will likely increase aggregate demand to point where output is $ .

A decrease in taxes aggregate demand through larger _ by households.

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

Last year, total income increased $1,000 and consumption increased $800. An increase in government spending equal to $10 would cause output to increase by $_ because the multiplier is __.

The government's choices regarding the overall level of government purchases and taxes is known as _____.

An increase in taxes shifts the aggregate curve to the .

A European recession that reduces U.S. net exports by $50 billion may ultimately lead to a $_____ billion reduction in aggregate demand if the MPC is 0.75.

A decrease in taxes will shift aggregate demand to the ___, cause consumption to _, and cause output to _. Due to the crowding-out effect, investment will ___.

To reduce aggregate demand, the government may reduce or increase .