Question 1

When Sam buys stock in Ford, I increases.

Accepted Answer

A) True 
 B)False  False

Question 2

Using the Keynesian cross, if autonomous consumption is $300 and investment is $200, and the marginal propensity to consume is 0.9, while government spending, net exports and taxes are zero, then equilibrium output is

Accepted Answer

A)  $450. 
B)  $500. 
C)  $5,000. 
D)  $950. 
A)  $450. 
B)  $500. 
C)  $5,000. 
D)  $950. D

Question 3

Using the Keynesian cross, if autonomous consumption is $200 and investment is $400, and the marginal propensity to consume is 0.75, while government spending, net exports and taxes are zero, then equilibrium output is

Accepted Answer

A)  $450. 
B)  $600. 
C)  $1,050. 
D)  none of the above. 
A)  $450. 
B)  $600. 
C)  $1,050. 
D)  none of the above. D

Question 4

The steeper the consumption function the higher the multiplier.

Accepted Answer

A) True 
 B)False

Question 5

Points to the left of the IS curve show an excess __________.

Accepted Answer

A)  demand for goods. 
B)  demand for money. 
C)  supply of goods. 
D)  supply of money. 
A)  demand for goods. 
B)  demand for money. 
C)  supply of goods. 
D)  supply of money.

Question 6

The LM curve is the equilibrium pairs of output and the interest rate in the goods market.

Accepted Answer

A) True 
 B)False

Question 7

If interest rates rise, which of the following would fall?

Accepted Answer

A)  taxes 
B)  autonomous consumption 
C)  investment 
D)  all of the above 
A)  taxes 
B)  autonomous consumption 
C)  investment 
D)  all of the above

Question 8

Using the Keynesian cross, if autonomous consumption is $200, government spending and taxes are $300, investment is $100, net exports is $100, and the marginal propensity to consume is 0.5, find equilibrium output.

Accepted Answer

A)  $600 
B)  $750 
C)  $1,400 
D)  none of the above 
A)  $600 
B)  $750 
C)  $1,400 
D)  none of the above

Question 9

Fiscal stimulus includes

Accepted Answer

A)  government spending. 
B)  decreasing taxes. 
C)  both of the above. 
D)  none of the above 
A)  government spending. 
B)  decreasing taxes. 
C)  both of the above. 
D)  none of the above

Question 10

The IS curve is upward sloping.

Accepted Answer

A) True 
 B)False

Question 11

A decrease in the interest rate shifts the IS curve to the left.

Accepted Answer

A) True 
 B)False

Question 12

What are the four components of aggregate demand?

Accepted Answer

consumption, investm

Question 13

If government spending decreases, then output _____ by _____ than the change in spending.

Accepted Answer

A)  increases, more 
B)  increases, less 
C)  decreases, more 
D)  decreases, less 
A)  increases, more 
B)  increases, less 
C)  decreases, more 
D)  decreases, less

Question 14

If the marginal propensity to consume is 0.95 and government spending falls by $200, then equilibrium output on the Keynesian cross diagram (for a fixed interest rate) rises by

Accepted Answer

A)  $180. 
B)  $200. 
C)  $380. 
D)  none of the above. 
A)  $180. 
B)  $200. 
C)  $380. 
D)  none of the above.

Question 15

If government spending and taxes fall by the same amount, what would be the impact on equilibrium output in the Keynesian cross model? Explain in words.

Accepted Answer

Output would fall. A reduction

Question 16

The larger the effect of changes in output on money demand, the flatter the LM curve is.

Accepted Answer

A) True 
 B)False

Question 17

One reason investment is inversely related to the interest rate is that higher interest rates means government bonds are a less attractive investment.

Accepted Answer

A) True 
 B)False

Question 18

During a financial panic, the LM curve

Accepted Answer

A)  shifts left. 
B)  shifts right. 
C)  stays the same. 
D)  none of the above 
A)  shifts left. 
B)  shifts right. 
C)  stays the same. 
D)  none of the above

Question 19

Draw a Keynesian cross diagram and show how a decrease in investment would affect equilibrium output.

Accepted Answer

@#IMG-DLM& @#IMG-DLM& The aggregate dema

Question 20

If autonomous consumption falls, then the consumption function becomes steeper.

Accepted Answer

A) True 
 B)False

Exam 21: Is-Lm

When Sam buys stock in Ford, I increases.

Using the Keynesian cross, if autonomous consumption is $300 and investment is $200, and the marginal propensity to consume is 0.9, while government spending, net exports and taxes are zero, then equilibrium output is

Using the Keynesian cross, if autonomous consumption is $200 and investment is $400, and the marginal propensity to consume is 0.75, while government spending, net exports and taxes are zero, then equilibrium output is

The steeper the consumption function the higher the multiplier.

Points to the left of the IS curve show an excess __________.

The LM curve is the equilibrium pairs of output and the interest rate in the goods market.

If interest rates rise, which of the following would fall?

Using the Keynesian cross, if autonomous consumption is $200, government spending and taxes are $300, investment is $100, net exports is $100, and the marginal propensity to consume is 0.5, find equilibrium output.

Fiscal stimulus includes

The IS curve is upward sloping.

A decrease in the interest rate shifts the IS curve to the left.

What are the four components of aggregate demand?

If government spending decreases, then output _____ by _____ than the change in spending.

If the marginal propensity to consume is 0.95 and government spending falls by $200, then equilibrium output on the Keynesian cross diagram (for a fixed interest rate) rises by

If government spending and taxes fall by the same amount, what would be the impact on equilibrium output in the Keynesian cross model? Explain in words.

The larger the effect of changes in output on money demand, the flatter the LM curve is.

One reason investment is inversely related to the interest rate is that higher interest rates means government bonds are a less attractive investment.

During a financial panic, the LM curve

Draw a Keynesian cross diagram and show how a decrease in investment would affect equilibrium output.

If autonomous consumption falls, then the consumption function becomes steeper.

The Financial System

Money

Interest Rates

The Economics of Interest-Rate Fluctuations

The Economics of Interest-Rate Spreads and Yield Curves

Rational Expectations, Efficient Markets, and the Valuation of Corporate Equities

Financial Structure, Transaction Costs, and Asymmetric Information

Bank Management

Innovation and Structure in Banking and Finance

The Economics of Financial Regulation

Financial Derivatives

Financial Crises: Causes and Consequences

Central Bank Form and Function

The Money Supply Process and the Money Multipliers

Monetary Policy Tools

Monetary Policy Targets and Goals

Foreign Exchange

International Monetary Regimes

Money Demand

Is-Lm in Action

Aggregate Supply and Demand and the Growth Diamond

Monetary Policy Transmission Mechanisms

Inflation and Money

Rational Expectations Redux: Monetary Policy Implications

Filters

If government spending decreases, then output _ by _ than the change in spending.