Chapter 23 - Six Debates Over Macroeconomic Policy

Economic theory

________ does not give a clear prediction about whether a higher rate of return would increase saving.

Monetary policy

________ affects aggregate demand primarily by changing interest rates.

Policymakers

________ should boost government spending, cut taxes, and expand the money supply.

Fiscal policy

________ works with a lag because of the long political process that governs changes in spending and taxes.

aggregate demand

Takes time for changes in interest rates to alter the ________ for goods and services.

Inflation

________ allows for the possibility of negative real interest rates.

Budget deficits

________ represent negative public savings.

Monetary/fiscal policy

can stabilize aggregate demand.

Tax cuts

________ have important influence on both aggregate demand and aggregate supply.

Zero

________ provides a more natural focal point for policymakers than any other number.

aggregate income

The fall in ________ is concentrated on those workers who lose their jobs.

new plant

When the saving rate is higher, more resources are available for investment in ________ and equipment.

Policymakers

________ should cut government spending, raise taxes, and reduce the money supply.

aggregate demand

They increase ________ by increasing households disposable income.