Chapter 34 - The Influence of Monetary and Fiscal Policy on Aggregate Demand

Vocabulary
Theory of Liquidity Preference Fiscal Policy Multiplier Effect Crowding-Out Effect Automatic Stabilizers
 * Definition: Keynes's theory that the interest rate adjusts to bring money supply and money demand into balance.
 * What It Means:
 * Definition: The setting of the level of government spending and taxation by government policymakers.
 * What It Means:
 * Definition: The additional shifts in aggregate demand that result when expansionary fiscal policy increases income and thereby increases consumer spending.
 * What It Means:
 * Definition: The offset in aggregate demand that results when expansionary fiscal policy raises the interest rate and thereby reduces investment spending.
 * What It Means:
 * Definition: Changes in fiscal policy that stimulate aggregate demand when the economy goes into a recession without policymakers having to take any deliberate action.
 * What It Means: