a. increase and the quantity of money demanded will decrease. b. increase and th

Question

a. increase and the quantity of money demanded will decrease.

b. increase and the quantity of money demanded will increase.

c. decrease and the quantity of money demanded will decrease.

d. decrease and the quantity of money demanded will increase.

2. Fiscal policy makers are working to increase Aggregate Demand to the greatest extent they can. They have $100 Billion dollars at their disposal. If the Marginal Propensity to Consume is 2/3, then ceteris paribus, the most appropriate policy recommendation these individuals can and should make would be:

a. Reduce net exports by $100 Billion

b. Increase the Money Supply by $100 Billion.

c. Increase Government Purchases by $100 Billion

d. Cut taxes by $100 Billion

Explanation / Answer

1. d. decrease and the quantity of money demanded will increase.

2. c. Increase Government Purchases by $100 Billion

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