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 cut government spending, raise taxes, and reduce 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.

Monetary

________ and fiscal policy can stabilize aggregate demand.

Budget deficits

________ represent negative public savings.

Inflation

________ allows for the possibility of negative real interest rates.

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.

tax reduction

If ________ takes the form of an expanded investment tax credit, they can induce increased spending on investment and goods**

new plant

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

Policymakers

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

aggregate demand

They increase ________ by increasing households disposable income.