Question 1

Table 27.1
-Use the Table 27.1 to answer the following question. Suppose the expenditure multiplier is 4. What will be the impact on equilibrium output of a drop in the interest rate from 15% to 9%, ceteris paribus?

Accepted Answer

The answer of  Table 27.1
-Use the Table 27.1 to...

Question 2

Describe the chain of events that are likely to unfold when the government reduces net taxes. Explain your answer in terms of its impact on aggregate output, the demand for money, the interest rate and planned investment.

Accepted Answer

The answer of Describe the chain of events that are...

Question 3

Table 27.1
-Use the Table 27.1 to answer the following question. Suppose the expenditure multiplier is 5 and the initial interest rate is 12%. Where will the interest rate have to move to in order to cause equilibrium output to fall by 400 billion?

Accepted Answer

The answer of  Table 27.1
-Use the Table 27.1 to...

Question 4

Explain the chain of events that results from an expansionary monetary policy. Explain your answer in terms of its impact on money supply, aggregate output, the demand for money, the interest rate and planned investment. Be sure to include any feedback effects in your answer.

Accepted Answer

The answer of Explain the chain of events that results...

Question 5

How does monetary policy affect the goods market?

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Question 6

Figure 27.1
-Assume that money demand is perfectly elastic. What implications would this have for an expansionary monetary policy?

Accepted Answer

The answer of  Figure 27.1
-Assume that money demand is...

Question 7

Did the anti-recession policies of 1974-1975 and 1980-1982 produce a crowding-out effect? Why or why not?

Accepted Answer

The answer of Did the anti-recession policies of 1974-1975 and...

Question 8

Describe expansionary fiscal policy.

Accepted Answer

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Question 9

Explain the "crowding-out effect."

Accepted Answer

The answer of Explain the "crowding-out effect."...

Question 10

Assume the Federal Reserve contracted the money supply in the face of high deficit spending on the part of Congress. Would this lessen or aggragavate the crowding out problem? Explain.

Accepted Answer

The answer of Assume the Federal Reserve contracted the money...

Question 11

Graphically illustrate the impact of a decrease and increase in the interest rate on aggregate expenditure. On your graph, illustrate the impact of an increase and decrease in the interest rate upon aggregate expenditure. Summarize the relationship among changes in the rate of interest (r), the change in planned investment spending (I), its impact on the aggregate expenditure function (AE), and the multiple effect on income (Y).

Accepted Answer

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Question 12

Describe expansionary monetary policy.

Accepted Answer

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Question 13

What action could the Fed take to reduce the crowding-out effect of an expansionary fiscal policy?

Accepted Answer

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Question 14

The size of the crowding-out effect, affecting the size of the government spending multiplier, depends on two things. Explain what those are.

Accepted Answer

The answer of The size of the crowding-out effect, affecting...

Question 15

Table 27.1
-Use the Table 27.1 to answer the following question. Suppose the expenditure multiplier is 5 and the initial interest rate is 12%. Where will the interest rate have to move to in order to cause equilibrium output to fall by 400 billion?

Accepted Answer

The answer of  Table 27.1
-Use the Table 27.1 to...

Question 16

Explain how the crowding out effect can be softened by the Federal Reserve accommodating an expansionary fiscal policy.

Accepted Answer

The answer of Explain how the crowding out effect can...

Question 17

What are the two primary things on which the size of the "crowding-out" effect depend?

Accepted Answer

The answer of What are the two primary things on...

Question 18

Figure 27.1
-Use Figure 27.1 above to answer the following question. Assume that the aggregate expenditure function depicted in the graph is based on an interest rate of 3%. Now assume that the interest rate rises to let's say 6%. Graphically illustrate the impact that this will have on the aggregate expenditure function and equilibrium output. Explain your answer.

Accepted Answer

The answer of  Figure 27.1
-Use Figure 27.1 above to...

Question 19

Table 27.1
-Use the Table 27.1 to answer the following question.. Suppose the expenditure multiplier is 10 and the initial interest rate is 15%. What would be the impact on the equilibrium output if the interest rate fell to 6%?

Accepted Answer

The answer of  Table 27.1
-Use the Table 27.1 to...

Question 20

Explain why a contractionary monetary policy would not necessarily result in interest rates rising by the full amount of what the initial contraction would produce. In other words, if there were no impact on the goods market the interest rate would rise to a higher level. Given that there is an impact explain how this works.

Accepted Answer

The answer of Explain why a contractionary monetary policy would...

Quiz 12: The Determination of Aggregate Output, the Price Level, and the Interest Rate

Table 27.1 -Use the Table 27.1 to answer the following question. Suppose the expenditure multiplier is 4. What will be the impact on equilibrium output of a drop in the interest rate from 15% to 9%, ceteris paribus?

Describe the chain of events that are likely to unfold when the government reduces net taxes. Explain your answer in terms of its impact on aggregate output, the demand for money, the interest rate and planned investment.

Table 27.1 -Use the Table 27.1 to answer the following question. Suppose the expenditure multiplier is 5 and the initial interest rate is 12%. Where will the interest rate have to move to in order to cause equilibrium output to fall by 400 billion?

Explain the chain of events that results from an expansionary monetary policy. Explain your answer in terms of its impact on money supply, aggregate output, the demand for money, the interest rate and planned investment. Be sure to include any feedback effects in your answer.

How does monetary policy affect the goods market?

Figure 27.1 -Assume that money demand is perfectly elastic. What implications would this have for an expansionary monetary policy?

Did the anti-recession policies of 1974-1975 and 1980-1982 produce a crowding-out effect? Why or why not?

Describe expansionary fiscal policy.

Explain the "crowding-out effect."

Assume the Federal Reserve contracted the money supply in the face of high deficit spending on the part of Congress. Would this lessen or aggragavate the crowding out problem? Explain.

Describe expansionary monetary policy.

What action could the Fed take to reduce the crowding-out effect of an expansionary fiscal policy?

The size of the crowding-out effect, affecting the size of the government spending multiplier, depends on two things. Explain what those are.

Table 27.1 -Use the Table 27.1 to answer the following question. Suppose the expenditure multiplier is 5 and the initial interest rate is 12%. Where will the interest rate have to move to in order to cause equilibrium output to fall by 400 billion?

Explain how the crowding out effect can be softened by the Federal Reserve accommodating an expansionary fiscal policy.

What are the two primary things on which the size of the "crowding-out" effect depend?

Table 27.1 -Use the Table 27.1 to answer the following question.. Suppose the expenditure multiplier is 10 and the initial interest rate is 15%. What would be the impact on the equilibrium output if the interest rate fell to 6%?