Question 1

Exhibit: Keynesian Cross   In this graph, the equilibrium levels of income and expenditure are:

Accepted Answer

A) Y1 and PE1. 
B) Y2 and PE2. 
C) Y3 and PE3. 
D) Y3 and PE4. 
A) Y1 and PE1. 
B) Y2 and PE2. 
C) Y3 and PE3. 
D) Y3 and PE4.

Question 2

The tax multiplier indicates how much _____ change(s) in response to a $1 change in taxes.

Accepted Answer

A) the budget deficit 
B) consumption 
C) income 
D) real balances 
A) the budget deficit 
B) consumption 
C) income 
D) real balances

Question 3

In the Keynesian-cross model, a decrease in the interest rate _____ planned investment spending and _____ the equilibrium level of income.

Accepted Answer

A) increases; increases 
B) increases; decreases 
C) decreases; decreases 
D) decreases; increases 
A) increases; increases 
B) increases; decreases 
C) decreases; decreases 
D) decreases; increases

Question 4

A downward-sloping investment function yields a falling IS curve, but a downward-sloping demand for real money balance curve yields a rising LM curve. Why?

Accepted Answer

Both the IS and the LM curves plot relat

Question 5

An IS curve shows combinations of:

Accepted Answer

A) taxes and government spending. 
B) nominal money balances and price levels. 
C) interest rates and income that bring equilibrium in the market for real balances. 
D) interest rates and income that bring equilibrium in the market for goods and services. 
A) taxes and government spending. 
B) nominal money balances and price levels. 
C) interest rates and income that bring equilibrium in the market for real balances. 
D) interest rates and income that bring equilibrium in the market for goods and services.

Question 6

In the Keynesian-cross model, actual expenditures equal:

Accepted Answer

A) GDP. 
B) the money supply. 
C) the supply of real balances. 
D) unplanned inventory investment. 
A) GDP. 
B) the money supply. 
C) the supply of real balances. 
D) unplanned inventory investment.

Question 7

Assume that planned expenditure consists of consumption, investment, and government expenditures only, and that investment and government expenditures are fixed. Further, assume that consumption C = c (Y - tY), where tY denotes taxes as a function of income. Calculate the equilibrium level of Y and the government expenditure multiplier.

Accepted Answer

For equilibrium, Actual Expenditure + Pl

Exhibit: Keynesian Cross In this graph, the equilibrium levels of income and expenditure are:

The tax multiplier indicates how much _____ change(s) in response to a $1 change in taxes.

In the Keynesian-cross model, a decrease in the interest rate _ planned investment spending and _ the equilibrium level of income.

A downward-sloping investment function yields a falling IS curve, but a downward-sloping demand for real money balance curve yields a rising LM curve. Why?

An IS curve shows combinations of:

In the Keynesian-cross model, actual expenditures equal:

The Science of Macroeconomics

The Data of Microeconomics

National Income: Where It Comes From and Where It Goes

The Monetary System: What It Is and How It Works

Inflation: Its Causes, Effects, and Social Costs

The Open Economy

Unemployment and the Labour Market

Economic Growth I: Capital Accumulation and Population Growth

Economic Growth II: Technology, Empirics, and Policy

Introduction to Economic Fluctuations

Aggregate Demand Ii: Applying the Islm Model

The Open Economy Revisited: the Mundellfleming Model and the Exchange-Rate Regime

Aggregate Supply and the Short-Run Tradeoff Between Inflation and Unemployment

A Dynamic Model of Economic Fluctuations

Alternative Perspectives on Stabilization Policy

Government Debt and Budget Deficits

The Financial System: Opportunities and Dangers

The Microfoundations of Consumption and Investment

Filters

Exam 11: Aggregate Demand I: Building the Islm Model

Exhibit: Keynesian Cross In this graph, the equilibrium levels of income and expenditure are:

The tax multiplier indicates how much _____ change(s) in response to a $1 change in taxes.

In the Keynesian-cross model, a decrease in the interest rate _____ planned investment spending and _____ the equilibrium level of income.

A downward-sloping investment function yields a falling IS curve, but a downward-sloping demand for real money balance curve yields a rising LM curve. Why?

An IS curve shows combinations of:

In the Keynesian-cross model, actual expenditures equal:

The Science of Macroeconomics

The Data of Microeconomics

National Income: Where It Comes From and Where It Goes

The Monetary System: What It Is and How It Works

Inflation: Its Causes, Effects, and Social Costs

The Open Economy

Unemployment and the Labour Market

Economic Growth I: Capital Accumulation and Population Growth

Economic Growth II: Technology, Empirics, and Policy

Introduction to Economic Fluctuations

Aggregate Demand Ii: Applying the Islm Model

The Open Economy Revisited: the Mundellfleming Model and the Exchange-Rate Regime

Aggregate Supply and the Short-Run Tradeoff Between Inflation and Unemployment

A Dynamic Model of Economic Fluctuations

Alternative Perspectives on Stabilization Policy

Government Debt and Budget Deficits

The Financial System: Opportunities and Dangers

The Microfoundations of Consumption and Investment

Filters

In the Keynesian-cross model, a decrease in the interest rate _ planned investment spending and _ the equilibrium level of income.