fiscal and monetary policy

Real Gross Domestic Product reaches its highest point at the ______ of the business cycle.

peak

What do critics of Keynesian Fiscal Policy say about the Keynesian multiplier.

the multiplier may be low because spending is based on lifetime income

Which of the following is a valid critique of fiscal stimulus?

timing lags may decrease the effectiveness of fiscal stimulus

Selling Treasury Bonds will do which of the following?

lower inflation

The FED buying bonds will do which of the following?

stimulate the economy by lowering interest rates and thus increasing GDP

One of the key responsibilities of the FED is making sure prices…

are stable

If the FED sells bonds then…

the money supply will decrease

A government that wants to increase aggregate demand will…

decrease taxes and increase government spending

An increase in government spending will cause aggregate demand to…

shift to the right

Who wrote the General Theory of Interest, Employment, and Income?

John Maynard Keynes

If the marginal propensity to consume is 75%, what is the Keynesian Multiplier?

4

If the Keynesian Multiplier is 2 and our village spends 3,000 coins to build a town hall in the middle of the village…

GDP will increase by 6,000

When GDP is decreasing then we are…

in the contraction phase of the business cycle

Which of the following is true about the unemployment rate?

it decreases in the expansionary phase of the business cycle

Which phase of the business cycle comes just before GDP is at its maximum

expansion

In the contraction phase of the business cycle…

unemployment starts to rise