UNIT 34: THE INFLUENCE OF MONETARY AND FISCAL POLICY ON

AGGREGATE DEMAND
Câu Hỏi 1
If the government wants to contract aggregate demand, it can ………… government purchases
or ………… taxes.
Select one:
a. increase, decrease
b. decrease, increase
c. decrease, decrease
d. increase, increase
Câu Hỏi 2
With the economy in a recession because of inadequate aggregate demand, the government
increases its purchases by $1,200. Suppose the central bank adjusts the money supply to hold
the interest rate constant, investment spending is fixed, and the marginal propensity to consume
is 2/3. How large is the increase in aggregate demand?
Select one:
a. $400
b. $800
c. $1,800
d. $3,600
Câu Hỏi 3
Monetary policy
Select one:
a. cannot be accurately described in terms of the interest rate or in terms of the money
supply.
b. must be described in terms of interest-rate targets.
c. must be described in terms of money-supply targets.
d. can be described either in terms of the money supply or in terms of the interest
rate.
Câu Hỏi 4
People choose to hold a larger quantity of money if
Select one:
a. the interest rate rises, which causes the opportunity cost of holding money to fall.
b. the interest rate falls, which causes the opportunity cost of holding money to rise.
c. the interest rate falls, which causes the opportunity cost of holding money to fall.
d. the interest rate rises, which causes the opportunity cost of holding money to rise.
Câu Hỏi 5
In which of the following cases would the quantity of money demanded be smallest?
Select one:
a. r = 0.06, P = 1.2
b. r = 0.06, P = 1.0
c. r = 0.04, P = 1.2
d. r = 0.05, P = 1.0
Câu Hỏi 6
According to liquidity preference theory, a decrease in money demand for some reason other
than a change in the price level causes
Select one:
a. the interest rate to fall, so aggregate demand shifts right.
b. the interest rate to rise, so aggregate demand shifts right.
c. the interest rate to rise, so aggregate demand shifts left.
d. the interest rate to fall, so aggregate demand shifts left.
Câu Hỏi 7
If people decide to hold less money, then
Select one:
a. money demand decreases, there is an excess supply of money, and interest rates rise.
b. money demand decreases, there is an excess supply of money, and interest rates
fall.
c. money demand increases, there is an excess demand for money, and interest rates fall.
d. money demand increases, there is an excess demand for money, and interest rates rise.
Câu Hỏi 8
According to liquidity preference theory, the slope of the money demand curve is explained as
follows:
Select one:
a. Interest rates rise as the Fed reduces the quantity of money demanded.
b. Interest rates fall as the Fed reduces the supply of money.
c. People will want to hold less money as the cost of holding it falls.
d. People will want to hold more money as the cost of holding it falls.
Câu Hỏi 9
When households find themselves holding too much money, they respond by
Select one:
a. purchasing interest-earning financial assets and interest rates fall.
b. holding the extra money and interest rates rise.
c. purchasing interest-earning financial assets and interest rates rise.
 d. selling interest-earning financial assets, which eliminates the excess supply of money.
Câu Hỏi 10
The interest rate falls if
Select one:
a. the price level falls or the money supply falls.
b. the price level falls or the money supply rises.
c. the price level rises or the money supply falls.
d. the price level rises or the money supply rises.
Câu Hỏi 11
If, at some interest rate, the quantity of money supplied is less than the quantity of money
demanded, people will desire to
Select one:
a. sell interest-bearing assets, causing the interest rate to decrease.
b. sell interest-bearing assets, causing the interest rate to increase.
c. buy interest-bearing assets, causing the interest rate to decrease.
d. buy interest-bearing assets, causing the interest rate to increase.
Câu Hỏi 12
Which of the following is correct?
Select one:
a. A higher price level shifts money demand rightward.
b. When money demand shifts rightward, the interest rate rises.
c. A higher interest rate reduces the quantity of goods and services demanded.
d. All of the above are correct.
Câu Hỏi 13
If the SBV increases the money supply,
Select one:
a. the interest rate decreases, which tends to reduce stock prices.
b. the interest rate increases, which tends to reduce stock prices.
c. the interest rate increases, which tends to raise stock prices.
d. the interest rate decreases, which tends to raise stock prices.
Câu Hỏi 14
If there is excess money supply, people will
Select one:
a. deposit more into interest-bearing accounts, and the interest rate will fall.
b. deposit more into interest-bearing accounts, and the interest rate will rise.
 c. withdraw money from interest-bearing accounts, and the interest rate will fall.
d. withdraw money from interest-bearing accounts, and the interest rate will rise.
Câu Hỏi 15
Other things the same, which of the following responses would we expect to result from a
decrease in Vietnam interest rates?
Select one:
a. Vietnam citizens decide to hold more foreign bonds.
b. People choose to hold more currency.
c. Your company decides to purchase a new equipment for its factory.
d. All of the above are correct.
Câu Hỏi 16
According to liquidity preference theory, an increase in the price level causes the interest rate to
Select one:
a. increase, which increases the quantity of goods and services demanded.
b. increase, which decreases the quantity of goods and services demanded.
c. decrease, which increases the quantity of goods and services demanded.
d. decrease, which decreases the quantity of goods and services demanded.
Câu Hỏi 17
An increase in the money supply will
Select one:
a. reduce interest rates, decreasing investment and increasing aggregate demand.
b. reduce interest rates, increasing investment and aggregate demand.
c. increase interest rates, decreasing investment and aggregate demand.
d. increase interest rates, increasing investment and aggregate demand.
Câu Hỏi 18
If the SBV conducts open-market sales, which of the following quantities increase(s)?
Select one:
a. interest rates, prices, and investment spending
b. interest rates and prices, but not investment spending
c. interest rates and investment, but not prices
d. interest rates, but not investment or prices
Câu Hỏi 19
If the stock market crashes, then
Select one:
a. aggregate demand decreases, which the SBV could offset by purchasing bonds.
 b. aggregate demand decreases, which the SBV could offset by selling bonds.
c. aggregate demand increases, which the SBV could offset by purchasing the money
supply.
d. aggregate demand increases, which the SBV could offset by selling bonds.
Câu Hỏi 20
In a certain economy, when income is $500, consumer spending is $375. The value of the
multiplier for this economy is 5. It follows that, when income is $510, consumer spending is
Select one:
a. $381.67.
b. $378.
c. $383.
d. $383.33.
Câu Hỏi 21
The logic of the multiplier effect applies
Select one:
a. only to changes in government spending.
b. to any change in spending on any component of GDP.
c. only when the crowding-out effect is sufficiently strong.
d. only to changes in the money supply.
Câu Hỏi 22
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
Select one:
a. the Fisher effect.
b. the wealth effect.
c. the multiplier effect.
d. the crowding-out effect.
Câu Hỏi 23
The multiplier effect states that there are additional shifts in aggregate demand from fiscal
policy, because it
Select one:
a. increases the money supply and thereby reduces interest rates.
b. reduces investment and thereby increases consumer spending.
c. decreases income and thereby increases consumer spending.
d. increases income and thereby increases consumer spending.
Câu Hỏi 24
If the MPC = 4/5, then the government purchases multiplier is
Select one:
a. 4/5.
b. 5/4.
c. 20.
d. 5.
Câu Hỏi 25
Suppose that the SBV is concerned about the effects of falling stock prices on the economy.
What could it do?
Select one:
a. buy bonds to lower the interest rate
b. sell bonds to raise the interest rate
c. sell bonds to raise the interest rate
d. buy bonds to raise the interest rate