08 Jun Question . Keynesian theory argues that
Question
. Keynesian theory argues that
a. decreases in the money supply lead to increases in the interest rate which increases investment which increases the level of real GDP.
b. increases in the money supply lead to decreases in the interest rate which increases investment which increases the level of real GDP.
c. increases in the money supply lead to decreases in the interest rate which decreases investment which decreases the level of real GDP.
d. increases in the money supply cause consumers to spend more which reduces the unemployment rate and therefore increases real GDP.
Q5. The goal of contractionary monetary policy is
a. to counteract the impact of fiscal policy.
b. to fight inflation.
c. to reduce the price of basic resources.
d. to fight a recession.
. The direct effect of an increase in the money supply is that
a. people will spend the extra money, causing the aggregate demand curve to shift to the right and resulting in a boost to economic activity.
b. people will spend the extra money, causing the aggregate demand curve to shift to the left and resulting in a recession.
c. people will save the money, causing an increase in bank deposits with the result that interest rates will increase.
d. people will save more money, causing a decrease in economic activity and a fall in prices.
A sale of bonds by the Fed generates
a. a decrease in the demand for money balances.
b. an increase in the demand for money balances.
c. an increase in the demand for bonds and a rise in bond prices.
d. an increase in the supply of bonds and a fall in bond prices.
Q11. Keynesian economists believe that monetary policy works through its effect on
a. long-run aggregate supply.
b. the interest rate.
c. consumer confidence.
d. the federal budget deficit.
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