ECON 252 CH 16

Suppose there were a large decline in net exports. If the Fed wanted to stabilize output, it could A. buy bonds to lower interest rates. B. sell bonds to raise interest rates. C. sell bonds to lower interest rates. D. buy bonds to raise interest rates

A decrease in government spending initially and primarily shifts A. aggregate supply to the right. B. aggregate demand to the left. C. neither aggregate demand nor aggregate supply. D. aggregate demand to the right.

If businesses and consumers become pessimistic, the Federal Reserve can attempt to reduce the impact on the price level and real GDP by A. increasing the money supply, which raises interest rates. B. decreasing the money supply, which lowers interest rates. C. increasing the money supply, which lowers interest rates. D. decreasing the money supply, which raises interest rates.

The primary argument against active monetary and fiscal policy is that A. history demonstrates that interest rates respond unpredictably to active policies, leading to unpredictable effects on income. B. attempts to stabilize the economy do not constitute a proper role for government in a democratic society. C. these policies affect the economy with a long lag. D. these policies affect the economy too quickly and with too much impact.

An increase in government spending initially and primarily shifts A. aggregate demand to the left. B. neither aggregate demand nor aggregate supply in either direction. C. aggregate supply to the right. D. aggregate demand to the right

Consider the following tools of monetary policy: I. Changing the discount rate of interest. II. Open Market Operations - Buying and Selling U.S. Government Securities. III. Changing required reserve ratios on time and demand deposits. Ranked in order from most frequent use to least frequent use by the FED we have:

The government builds a new water-treatment plant. The owner of the company that builds the plant pays her workers. The workers increase their spending. Firms from which the workers buy goods increase their output. This type of effect on spending illustrates

According to classical macroeconomic theory, output is determined by the supplies of capital and labor and the available production technology. given output and the interest rate, the price level adjusts to balance the supply of, and demand for, money. for any given level of output, the interest rate adjusts to balance the supply of, and demand for, loanable funds. All of the above are correct.

In a certain economy, when income is $400, consumer spending is $350. The value of the multiplier for this economy is 3.125. It follows that, when income is $450, consumer spending is____ and an initial impulse of $50 translates into a ______ increase in agg demand

The U.S. FED currently follows a policy of striving to hit ______ targets in the short run and _____ targets in the long run.

If the multiplier is 5, then the MPC is

With respect to their impact on aggregate demand for the U.S. economy, which of the following represents the correct ordering of the wealth effect, interest-rate effect, and exchange-rate effect from most important to least important?

The change in aggregate demand that results from fiscal expansion changing the interest rate is called the

To reduce the effects of crowding out caused by an increase in government expenditures, the Federal Reserve could A. increase the money supply by buying bonds. B. decrease the money supply by buying bonds. C. increase the money supply by selling bonds. D. increase the money supply by selling bonds

If there is excess money supply, people will A. deposit more into interest-bearing accounts, and the interest rate will rise. B. withdraw money from interest-bearing accounts, and the interest rate will fall. C. withdraw money from interest-bearing accounts, and the interest rate will rise. D. deposit more into interest-bearing accounts, and the interest rate will fall.

In the short run, following an increase in government spending, real wages will ____and labor employment will _____.

The opportunity cost of holding money a. decreases when the interest rate increases, so people desire to hold less of it. b. increases when the interest rate increases, so people desire to hold more of it. c. decreases when the interest rate increases, so people desire to hold more of it. d. increases when the interest rate increases, so people desire to hold less of it.

According to the theory of liquidity preference, A. the demand for money is represented by a downward-sloping line on a supply-and-demand graph. B. if the interest rate is below the equilibrium level, then the quantity of money people want to hold is less than the quantity of money the Fed has created. C. if the interest rate is above the equilibrium level, then the quantity of money people want to hold is greater than the quantity of money the Fed has created.

The term crowding-out effect refers to A. the reduction in aggregate supply that results when a monetary expansion causes the interest rate to decrease. B. the reduction in aggregate demand that results when a fiscal expansion causes the interest rate to increase. C. the reduction in aggregate demand that results when a monetary expansion causes the interest rate to decrease. D. the reduction in aggregate demand that results when a decrease in government spending or an increase in taxes causes the interest rate to increase.