Question 1

"Fiscal stimulus" could be represented by an increase in _____ in the aggregate demand function.

Accepted Answer

A)  C 
B)  I 
C)  G 
D)  NX 
A)  C 
B)  I 
C)  G 
D)  NX

Question 2

If imports decrease, then equilibrium output falls.

Accepted Answer

A) True 
 B)False

Question 3

The marginal propensity to consume is the slope of the consumption function.

Accepted Answer

A) True 
 B)False

Question 4

A decrease in taxes increases equilibrium output through its effect on consumption.

Accepted Answer

A) True 
 B)False

Question 5

In the Keynesian cross model, if the government lowers taxes, then ___ rises.

Accepted Answer

A)  consumption 
B)  disposable income 
C)  equilibrium output 
D)  all of the above 
A)  consumption 
B)  disposable income 
C)  equilibrium output 
D)  all of the above

Question 6

On the Keynesian cross diagram, an increase in which of the following would cause the aggregate demand function to shift up?

Accepted Answer

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

Question 7

At a point to the right of the IS curve, there is an excess supply of goods.

Accepted Answer

A) True 
 B)False

Question 8

The IS curve is the combination of output and the interest rate, where investment equals savings.

Accepted Answer

A) True 
 B)False

Question 9

What does the multiplier measure?

Accepted Answer

the increase in outp

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

Using the Keynesian cross, if autonomous consumption is $100, government spending and taxes are $200, investment is $100, net exports are zero, and the marginal propensity to consume is 0.8, find equilibrium output.

Accepted Answer

A)  $720 
B)  $1,000 
C)  $1,200 
D)  none of the above 
A)  $720 
B)  $1,000 
C)  $1,200 
D)  none of the above

Question 12

Investment fell leading up to each recession in the United States in the 1900s.

Accepted Answer

A) True 
 B)False

Question 13

If the interest rate rises, then _____ falls due to a(n) _____ of the exchange rate.

Accepted Answer

A)  exports, appreciation 
B)  exports, depreciation 
C)  imports, appreciation 
D)  imports, depreciation 
A)  exports, appreciation 
B)  exports, depreciation 
C)  imports, appreciation 
D)  imports, depreciation

Question 14

The IS curve slopes down because as the interest rate rises

Accepted Answer

A)  borrowing costs rise. 
B)  the net present value of business projects falls. 
C)  the domestic currency strengthens, dampening export demand. 
D)  all of the above. 
A)  borrowing costs rise. 
B)  the net present value of business projects falls. 
C)  the domestic currency strengthens, dampening export demand. 
D)  all of the above.

Question 15

At a point to the right of the LM curve, there is an excess supply of money.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is not an endogenous variable in the IS-LM model?

Accepted Answer

A)  interest rate 
B)  price level 
C)  output 
D)  none of the above 
A)  interest rate 
B)  price level 
C)  output 
D)  none of the above

Question 17

If the marginal propensity to consume is 0.75, the multiplier is 4.

Accepted Answer

A) True 
 B)False

Question 18

If autonomous consumption is $50, disposable income is $500 and the marginal propensity to consume is 0.8, find C.

Accepted Answer

The answer of If autonomous consumption is $50, disposable income...

Question 19

Using the Keynesian cross, if autonomous consumption is $400, government spending is $50, investment is $200, net exports and taxes are zero, and the marginal propensity to consume is 0.8, find equilibrium output.

Accepted Answer

The answer of Using the Keynesian cross, if autonomous consumption...

Question 20

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

Accepted Answer

A)  exports 
B)  imports 
C)  investment 
D)  all of the above 
A)  exports 
B)  imports 
C)  investment 
D)  all of the above

Exam 21: Is-Lm

"Fiscal stimulus" could be represented by an increase in _____ in the aggregate demand function.

If imports decrease, then equilibrium output falls.

The marginal propensity to consume is the slope of the consumption function.

A decrease in taxes increases equilibrium output through its effect on consumption.

In the Keynesian cross model, if the government lowers taxes, then ___ rises.

On the Keynesian cross diagram, an increase in which of the following would cause the aggregate demand function to shift up?

At a point to the right of the IS curve, there is an excess supply of goods.

The IS curve is the combination of output and the interest rate, where investment equals savings.

What does the multiplier measure?

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

Using the Keynesian cross, if autonomous consumption is $100, government spending and taxes are $200, investment is $100, net exports are zero, and the marginal propensity to consume is 0.8, find equilibrium output.

Investment fell leading up to each recession in the United States in the 1900s.

If the interest rate rises, then _____ falls due to a(n) _____ of the exchange rate.

The IS curve slopes down because as the interest rate rises

At a point to the right of the LM curve, there is an excess supply of money.

Which of the following is not an endogenous variable in the IS-LM model?

If the marginal propensity to consume is 0.75, the multiplier is 4.

If autonomous consumption is $50, disposable income is $500 and the marginal propensity to consume is 0.8, find C.

Using the Keynesian cross, if autonomous consumption is $400, government spending is $50, investment is $200, net exports and taxes are zero, and the marginal propensity to consume is 0.8, find equilibrium output.

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

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If the interest rate rises, then _ falls due to a(n) _ of the exchange rate.