Macroeconomics Final 2022 (chapter 34)
Which of the following policies would be advocated by someone who wants the government to follow an active stabilization policy when the economy is experiencing severe unemployment? ***
increase government expenditures
Which of the following policy alternatives would be an appropriate response to a sharp increase in investment spending, assuming policy makers want to stabilize output? ***
increase taxes
Suppose households attempt to increase their money holdings. To stabilize output by countering this increase in money demand, the Federal Reserve would ***
increase the money supply
The multiplier effect states that there are additional shifts in aggregate demand from fiscal policy, because it ***
increases income and thereby increases consumer spending
People will want to hold more money if the price level
increases or if the interest rate decreases
When the Federal Reserve decreases the Federal Funds target rate, the lower rate is achieved through ***
purchases of government bonds, which reduces interest rates and causes people to hold more money
An increase in the money supply will ***
reduce interest rates, increasing investment and aggregate demand
Suppose there is an increase in government spending. To stabilize output, the Federal Reserve would ***
decrease the money supply
If taxes ***
decrease, then consumption increases, and aggregate demand shifts rightward
If the Fed conducts open-market sales, the money supply ***
decreases and aggregate demand shifts left
Fiscal policy refers to the idea that aggregate demand is affected by changes in ***
government spending and taxes
The fed is concerned about stock market booms because the booms ***
increase both consumption and investment spending.
A goal of monetary policy and fiscal policy is to ***
Offset shifts in aggregate demand and theeby stabilize the economy
Suppose there were a large decline in net exports. If the Fed wants to stabilize output, it could ***
buy bonds to lower interest rates
