Both monetary policy and fiscal policy affect aggregate demand.
Group of answer choices
True
False
True
Monetary policy affects aggregate demand by changing money supply and interest rates in the economy
If AD has to increase then central bank will employ expansionary monetary policy which will increase money supply in the economy by
1 reduction in discount rate
2 decrease in CRR
3 sale of securities in open market operations
This will induce liquidity in the economy and people with more currency will increase their demand
Inverse applies to when central bank wants to decrease AD by decreasing money supply
Fiscal policy also affects aggregate demand as follows
If govt want to increase AD then it will
1 decrease taxes
2 increase government spending
So that AD will increase because fiscal policy will help in increase the consumption, investment in the economy
When it wants to decrease AD then contractionay policies
Like increase in taxes, less spending, borrowings etc
Both monetary policy and fiscal policy affect aggregate demand. Group of answer choices True False
Tightening monetary policy causes interest rates to __________ and aggregate demand to __________. Group of answer choices rise / increase fall / increase rise / decrease fall / decrease
Use of discretionary policy to stabilize the economy Should policymakers use monetary policy, fiscal policy, or both in an effort to stabilize the economy? The following questions address the issue of how monetary and fiscal policies affect the economy and the pros and cons of using these tools to lessen economic fluctuations. The following graph shows a hypothetical aggregate demand curve (AD), short-run aggregate supply curve (AS), and long-run aggregate supply curve (LRAS) For the economy in May 2020. According to the...
Aggregate Demand is always equal to Gross Domestic Product Group of answer choices True False Which of the following is NOT true about GDP as an indicator of how well or how poorly the economy is performing. Group of answer choices GDP is not a good indicator because the U.S. is a "24/7" economy, while other economies value time off GDP is not a good indicator because it can be undervalued GDP is not a good indicator because it takes...
Expansionary monetary policy would most like to affect aggregate demand through A. consumption B. investment C. net exports D. aggregate production function E. none of the above
Consider the following statement: "Fiscal policy is a very precise tool for controlling aggregate demand. If the government wants to increase aggregate demand by $5 billion, all it has to do is carry out carry out exactly $5 billion worth of government spending". Is this statement true or false? Explain in the answer considering both a closed economy and open economy. Also consider the difference between fixed and floating exchange rates in the open economy.
Give some examples of monetary policy that decrease aggregate demand. Examples of monetary policy that decrease aggregate demand include O A. O B. O C. O D. a decrease in the quantity of money and an increase in interest rates a decrease in taxes and a decrease in interest rates an increase in taxes and a decrease in the quantity of money an increase in transfer paynents and an increase in interest rates Click to select your answer
If crowding out exists, contractionary fiscal policy will cause the aggregate demand curve to shift in by more than indicated by the government spending multiplier. True False
Monetary policy affects employment Group of answer choices in neither the long run nor the short run. in both the long run and the short run. only in the long run. only in the short run.
7. Use of discretionary policy to stabilize the economy Should the government use monetary and fiscal policy in an effort to stabilize the economy? The following questions address the issue of how monetary and fiscal policies affect the economy, and the pros and cons of using these tools to combat economic fluctuations. The following graph shows a hypothetical aggregate demand curve (AD), short-run aggregate supply curve (AS), and long-run aggregate supply curve (LRAS) for the U.S. economy in April 2020. Suppose the government...
If aggregate demand shifts left, then in the short run Group of answer choices the price level and real GDP both rise. the price and real GDP both fall. the price level rises and real GDP falls. the price level falls and real GDP rises.