Discretionary fiscal policies that increase aggregate demand tend to result in
A. higher Real GDP ("RGDP") and a lower price level ("PI").
B. lower Real GDP ("RGDP") and a higher price level ("PI").
C. higher Real GDP ("RGDP") and a higher price level ("PI").
D. lower Real GDP ("RGDP") and a lower price level ("PI").
Answer: C
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The quantity theory of money states that
A) inflation increases when the money growth rate increases. B) as the price level increases, the demand for money increases. C) as the interest rate rises, the demand for money decreases. D) changes in the quantity of money are determined by the commercial banks and not the Federal Reserve.
Based on the table "Real and Nominal GDP," if year three is the base year, then the real GDP in year two is ________
A) 8250 B) 5900 C) 7500 D) 6775 E) none of the above
The goal of expansionary monetary policy is to:
A. reduce interest rates to stimulate the economy. B. increase interest rates to stimulate the economy. C. reduce interest rates to slow down the economy. D. increase interest rates to slow down the economy.
Which of the following is true from the perspective of the New Keynesian school of thought?
a. Fluctuations in private spending does not affect aggregate demand in an economy. b. Investment spending remains relatively constant irrespective of the supply shocks. c. Fluctuations in aggregate demand are not the primary source of problem for policymakers. d. The government should limit its role to administrative functions. e. Monetary and fiscal policies often fail to restore macroeconomic equilibrium.