Question 1

If the inflation rate is zero, then the nominal and real interest rate are the same.

Accepted Answer

A) True 
 B)False

Question 2

In recent years, the Federal Reserve has conducted policy by setting a target for the

Accepted Answer

A)  size of the money supply.
B)  growth rate of the money supply.
C)  federal funds rate.
D)  discount rate.E) All of the above
F) C) and D)

Question 3

Depending on the size of the multiplier and crowding-out effects, the rightward shift in aggregate demand from a tax cut could be larger or smaller than the tax cut.

Accepted Answer

A) True 
 B)False

Question 4

If the marginal propensity to consume is 6/7, then the multiplier is 7.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following properly describes the interest-rate effect that helps explain the slope of the aggregate-demand curve?

Accepted Answer

A)  As the money supply increases, the interest rate falls, so spending rises.
B)  As the money supply increases, the interest rate rises, so spending falls.
C)  As the price level increases, the interest rate falls, so spending rises.
D)  As the price level increases, the interest rate rises, so spending falls.E) C) and D)
F) A) and B)

Question 6

If net exports fall $40 billion, the MPC is 9/11, and there is a multiplier effect but no crowding out and no investment accelerator, then

Accepted Answer

A)  aggregate demand falls by 2 × $40 billion.
B)  aggregate demand falls by 11/2 × $40 billion.
C)  aggregate demand falls by 11/9 × $40 billion.
D)  aggregate demand falls by 9/11 × $40 billion.E) None of the above
F) B) and D)

Question 7

Suppose that the government increases expenditures by $150 billion while increasing taxes by $150 billion. Suppose that the MPC is .80 and that there are no crowding out or accelerator effects. What is the combined effects of these changes? Why is the combined change not equal to zero?

Accepted Answer

The multiplier is 1/(1-MPC) = 1/(1-.8) =...

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

If net exports fall $40 billion, the MPC is 9/11, and there is a multiplier effect but no crowding out and no investment accelerator, then

Correct Answer
verified

Suppose that the government increases expenditures by $150 billion while increasing taxes by $150 billion. Suppose that the MPC is .80 and that there are no crowding out or accelerator effects. What is the combined effects of these changes? Why is the combined change not equal to zero?

Correct Answer
verified
The multiplier is 1/(1-MPC) = 1/(1-.8) =...
View Answer

In recent years, the Federal Reserve has conducted policy by setting a target for the

Correct Answer
verified

Which of the following properly describes the interest-rate effect that helps explain the slope of the aggregate-demand curve?

Correct Answer
verified

If the marginal propensity to consume is 6/7, then the multiplier is 7.

Correct Answer
verified

If the inflation rate is zero, then the nominal and real interest rate are the same.

Correct Answer
verified

Depending on the size of the multiplier and crowding-out effects, the rightward shift in aggregate demand from a tax cut could be larger or smaller than the tax cut.

Correct Answer
verified

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

If net exports fall $40 billion, the MPC is 9/11, and there is a multiplier effect but no crowding out and no investment accelerator, then

Correct AnswerverifiedShow Answer

Suppose that the government increases expenditures by $150 billion while increasing taxes by $150 billion. Suppose that the MPC is .80 and that there are no crowding out or accelerator effects. What is the combined effects of these changes? Why is the combined change not equal to zero?

Correct AnswerverifiedThe multiplier is 1/(1-MPC) = 1/(1-.8) =...View AnswerShow Answer

In recent years, the Federal Reserve has conducted policy by setting a target for the

Correct AnswerverifiedShow Answer

Which of the following properly describes the interest-rate effect that helps explain the slope of the aggregate-demand curve?

Correct AnswerverifiedShow Answer

If the marginal propensity to consume is 6/7, then the multiplier is 7.

Correct AnswerverifiedShow Answer

If the inflation rate is zero, then the nominal and real interest rate are the same.

Correct AnswerverifiedShow Answer

Depending on the size of the multiplier and crowding-out effects, the rightward shift in aggregate demand from a tax cut could be larger or smaller than the tax cut.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
The multiplier is 1/(1-MPC) = 1/(1-.8) =...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified