Q Pop Quiz #7 and 8 1. In Mankiw’s Why It Matters from ch 34, Mankiw says that we got all three policy interventions because the recession was so severe in 2009. Please list those three policy interventions. 2. Explain the crowding-out effect using Figure 5 from 34-2e in Ch 34. 3. Using the cartoon from 34-3b, the Case against Active Stabilization Policy, please comment on any possible problems of monetary and fiscal policies to stabilize an economy. 4. The Fed increases the money supply through the open-market operation. Explain the impact of this increase in the interest rate on output and the price level in the short/long run. Video Problem Walk-Through: Using the Theory of Liquidity Preference to Analyze a Reduction in the Reserve Requirement in Ch 34 has the answers. 5. Suppose the government increases spending by $800 billion and suppose the marginal propensity to consume is 0.70. By how much will aggregate demand expand altogether after the multiplier effect (ignoring any crowding out)? Video Problem Walk-Through: Estimating the Impact of a Reduction in Government Spending on Aggregate Demand in Ch 34 has the same question with different numbers.