宏观经济学课件：9 fiscal policy.pptVIP

3. a. When more ATMs are available, money demand is reduced and the money-demand curve shifts to the left from MD 1 to MD 2, as shown in Figure 6. If the Fed does not change the money supply, which is at MS1, the interest rate will decline from r1 to r2. The decline in the interest rate shifts the aggregate-demand curve to the right, as consumption and investment increase. ? b. If the Fed wants to stabilize aggregate demand, it should reduce the money supply to MS 2, so the interest rate will remain at r1 and aggregate demand will not change. ? 6. a. Legislation allowing banks to pay interest on checking deposits increases the return to money relative to other financial assets, thus increasing money demand. ? b. If the money supply remained constant (at MS1), the increase in the demand for money would have raised the interest rate, as shown in Figure 10. The rise in the interest rate would have reduced consumption and investment, thus reducing aggregate demand and output. ? c. To maintain a constant interest rate, the Fed would need to increase the money supply from MS 1 to MS 2. Then aggregate demand and output would be unaffected. Q8. a. The initial effect of the tax reduction of $20 billion is to increase aggregate demand by $20 billion x 3/4 (the MPC) = $15 billion. The cut in taxes increases consumption spending depending on the MPC. ? b. With an MPC of 3/4, the multiplier is 1/(1-3/4) = 4. So the total effect is $15 billion x 4 = $60 billion. c. Government purchases have an initial effect of the full $20 billion, since they increase aggregate demand directly by that amount. The total effect of an increase in government purchases is thus $20 billion x 4 = $80 billion. So government purchases lead to a bigger effect on output than a tax cut does. The difference arises because government purchases affect aggregate demand by the full amount, but a tax cut is partly saved by consumers, so doesn’t lead to as much of an increase in aggregate demand. 9. a.