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Questions and Answers

(1123 solutions)

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Which of the following best describes how an expansionary monetary policy shifts aggregate demand?

d. The money supply shifts right, the interest rate falls, investment increases, and aggregate demand shifts right....

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Posted by Cleveland on September 17, 2024
Which of the following statements about stabilization policy is true?

d. Many economists prefer automatic stabilizers because they affect the economy with a shorter lag than activist stabilization policy....

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Posted by Cleveland on September 17, 2024
Which of the following is an automatic stabilizer?

c. Income taxes...

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Posted by Cleveland on September 17, 2024
When an increase in government purchases causes firms to purchase additional plant and equipment, we have seen a demonstration of _______.

e. the investment accelerator...

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Posted by Cleveland on September 17, 2024
When an increase in net exports increases the income of domestic consumers, and those consumers spend some of that increase in income on additional consumer goods, we have seen a demonstration of _______.

a. the multiplier effect...

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Posted by Cleveland on September 17, 2024
Suppose the government increases its purchases by $25 billion. If the multiplier effect exceeds the crowding-out effect, then _______.

d. the aggregate-demand curve shifts to the right by more than $25 billion...

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Posted by Cleveland on September 17, 2024
Which of the following statements regarding taxes is correct?


a. A permanent change in taxes has a greater effect on aggregate demand than a temporary change in taxes....

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Posted by Cleveland on September 17, 2024
When an increase in government purchases raises incomes, shifts money demand to the right, raises the interest rate, and lowers investment, we have seen a demonstration of _______.

When an increase in government purchases raises incomes, shifts money demand to the right, raises the interest rate, and lowers investment, we have seen a demonstration of _______.

c. the crowding-out effect...

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Posted by Cleveland on September 17, 2024
Suppose that irrational exuberance has generated an increase in investment spending so that the current level of output exceeds the long-run natural level. If policymakers choose to engage in activist stabilization policy, they should _______.

c. decrease government spending, which shifts aggregate demand to the left...

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Posted by Cleveland on September 17, 2024

a. raises the value of the multiplier...

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Posted by Cleveland on September 17, 2024