Question 1

Government expenditures on capital goods such as roads could increase aggregate supply.Such effects on aggregate supply are likely to matter more in the short run than in the long run.

Accepted Answer

A) True 
 B)False

Question 2

When government expenditures increase,the interest rate

Accepted Answer

A)   increases,making the change in aggregate demand larger.
B)   increases,making the change in aggregate demand smaller
C)   decreases,making the change in aggregate demand larger.
D)   decreases,making the change in aggregate demand smaller.E) A) and D)
F) A) and C)

Question 3

Some economists,called supply-siders,argue that changes in the money supply exert a strong influence on aggregate supply.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following shifts aggregate demand to the right?

Accepted Answer

A)   The price level rises.
B)   The price level falls.
C)   The money supply falls.
D)   None of the above is correct.E) None of the above
F) A) and B)

Question 5

When the money supply increases,there is an excess _____ of money.As a result,interest rates _____ and aggregate demand _____.

Accepted Answer

supply,fal...

Question 6

Figure 21-3. 
-Refer to Figure 21-3.What quantity is represented by the vertical line on the left-hand graph?

Accepted Answer

A)   the supply of money
B)   the demand for money
C)   the rate of inflation
D)   the quantity of bonds that was most recently sold or purchased by the Federal ReserveE) C) and D)
F) A) and B)

Question 7

Monetary policy

Accepted Answer

A)   must be described in terms of interest-rate targets.
B)   must be described in terms of money-supply targets.
C)   can be described either in terms of the money supply or in terms of the interest rate.
D)   cannot be accurately described in terms of the interest rate or in terms of the money supply.E) A) and C)
F) B) and C)

Question 8

If the inflation rate is zero,then

Accepted Answer

A)   both the nominal interest rate and the real interest rate can fall below zero.
B)   the nominal interest rate can fall below zero,but the real interest rate cannot fall below zero.
C)   the real interest rate can fall below zero,but the nominal interest rate cannot fall below zero.
D)   neither the nominal interest rate nor the real interest rate can fall below zero.E) A) and B)
F) A) and C)

Question 9

In the long run,changes in the money supply affect

Accepted Answer

A)   prices.
B)   output.
C)   unemployment rates.
D)   All of the above.E) A) and B)
F) A) and C)

Question 10

The Fed can influence the money supply by

Accepted Answer

A)   changing how much it lends to banks.
B)   changing the interest rate it pays banks on the reserves they are holding.
C)   using open-market operations.
D)   All of the above are correct.E) A) and D)
F) None of the above

Question 11

If money demand shifted to the right and the Federal Reserve desired to return the interest rate to its original value,it could

Accepted Answer

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

Question 12

Figure 21-4.On the figure,MS represents money supply and MD represents money demand. 1 to MD2? A)  a decrease in the price level B)  a decrease in the cost of borrowing C)  an increase in the price level D)  an increase in the cost of borrowing" class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 21-4.Which of the following events could explain a shift of the money-demand curve from MD1 to MD2?

Accepted Answer

A)   a decrease in the price level
B)   a decrease in the cost of borrowing
C)   an increase in the price level
D)   an increase in the cost of borrowingE) None of the above
F) B) and C)

Question 13

According to liquidity preference theory,investment spending would rise if the price level

Accepted Answer

A)   fell,making the interest rate rise.
B)   fell,making the interest rate fall.
C)   rose,making the interest rate rise.
D)   rose,making the interest rate fall.E) None of the above
F) A) and C)

Question 14

A significant lag for monetary policy is the time it takes to for a change in the money supply to change the economy.A significant lag for fiscal policy is the time it takes to pass legislation authorizing it.

Accepted Answer

A) True 
 B)False

Question 15

Suppose that the Federal reserve is concerned about the effects of rising stock prices on the economy.What could it do?

Accepted Answer

A)   buy bonds to raise the interest rate.
B)   buy bonds to lower the interest rate
C)   sell bonds to raise the interest rate .
D)   sell bonds to raise the interest rateE) B) and C)
F) A) and D)

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

As the interest rate falls,

Accepted Answer

A)   the quantity of money demanded falls,which would reduce a shortage.
B)   the quantity of money demanded falls,which would reduce a surplus.
C)   the quantity of money demanded rises,which would reduce a shortage.
D)   the quantity of money demanded rises,which would reduce a surplus.E) A) and D)
F) B) and C)

Question 18

Figure 21-1 
-Refer to Figure 21-1.There is an excess demand for money at an interest rate of

Accepted Answer

A)   2 percent.
B)   3 percent.
C)   4 percent.
D)   None of the above is correct.E) All of the above
F) A) and D)

Question 19

The logic of the multiplier effect applies

Accepted Answer

A)   only to changes in government spending.
B)   to any change in spending on any component of GDP.
C)   only to changes in the money supply.
D)   only when the crowding-out effect is sufficiently strong.E) B) and C)
F) A) and D)

Question 20

A decrease in the interest rate could have been caused by the money-demand curve shifting

Accepted Answer

A)   leftward because the price level fell.
B)   leftward because the price level rose
C)   rightward because the price level fell.
D)   rightward because the price level rose.E) A) and D)
F) A) and C)

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

Figure 21-4.On the figure,MS represents money supply and MD represents money demand. -Refer to Figure 21-4.Which of the following events could explain a shift of the money-demand curve from MD1 to MD2?

Correct AnswerverifiedShow Answer

Figure 21-1 -Refer to Figure 21-1.There is an excess demand for money at an interest rate of

Correct AnswerverifiedShow Answer

If the inflation rate is zero,then

Correct AnswerverifiedShow Answer

A decrease in the interest rate could have been caused by the money-demand curve shifting

Correct AnswerverifiedShow Answer

When the money supply increases,there is an excess _____ of money.As a result,interest rates _____ and aggregate demand _____.

Correct Answerverifiedsupply,fal...View AnswerShow Answer

A significant lag for monetary policy is the time it takes to for a change in the money supply to change the economy.A significant lag for fiscal policy is the time it takes to pass legislation authorizing it.

Correct AnswerverifiedShow Answer

Suppose that the Federal reserve is concerned about the effects of rising stock prices on the economy.What could it do?

Correct AnswerverifiedShow Answer

The logic of the multiplier effect applies

Correct AnswerverifiedShow Answer

Some economists,called supply-siders,argue that changes in the money supply exert a strong influence on aggregate supply.

Correct AnswerverifiedShow Answer

If money demand shifted to the right and the Federal Reserve desired to return the interest rate to its original value,it could

Correct AnswerverifiedShow Answer

Figure 21-3. -Refer to Figure 21-3.What quantity is represented by the vertical line on the left-hand graph?

Correct AnswerverifiedShow Answer

When government expenditures increase,the interest rate

Correct AnswerverifiedShow Answer

According to liquidity preference theory,investment spending would rise if the price level

Correct AnswerverifiedShow Answer

Monetary policy

Correct AnswerverifiedShow Answer

In the long run,changes in the money supply affect

Correct AnswerverifiedShow Answer

The Fed can influence the money supply by

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Government expenditures on capital goods such as roads could increase aggregate supply.Such effects on aggregate supply are likely to matter more in the short run than in the long run.

Correct AnswerverifiedShow Answer

Which of the following shifts aggregate demand to the right?

Correct AnswerverifiedShow Answer

As the interest rate falls,

Correct AnswerverifiedShow Answer

Figure 21-4.On the figure,MS represents money supply and MD represents money demand. -Refer to Figure 21-4.Which of the following events could explain a shift of the money-demand curve from MD₁ to MD₂?

Correct Answer
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When the money supply increases,there is an excess ___ of money.As a result,interest rates _ and aggregate demand ___.

Correct Answer
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supply,fal...
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