Influence Of Monetary And Fiscal Policy On AD

Question 1

Equilibrium in money market

Answer 1

If IR > equilibrium, quantity of money people want to hold Md

Question 2

Crowding out

Answer 2

Offset in AD that results when expansionary FPolicy increases IR and therefore decreases I spending

Question 3

Automatic stabilisers

Answer 3

Changes in fiscal policy that stimulate AD when economy goes into recession without policy makers having to take any deliberate action
-taxes

Question 4

Theory of liquidity preference

Answer 4

Keynes’ theory that the IR adjusts to bring MS and Mdemand into balance