Question 1

If both government expenditure, G, and taxation, T, increase by the same amount, the IS curve will:

Accepted Answer

A) shift up. 
B) shift down. 
C) rotate. 
D) none of the above. 
A) shift up. 
B) shift down. 
C) rotate. 
D) none of the above. A

Question 2

In the IS-LM model the equilibrium level of the interest rate depends on:

Accepted Answer

A) money supply. 
B) government spending. 
C) the marginal propensity to consume. 
D) all of the above. 
A) money supply. 
B) government spending. 
C) the marginal propensity to consume. 
D) all of the above. D

Question 3

According to the IS-MP-PC model, a decrease in taxation, T, accompanied by an identical reduction in public expenditure, G, causes

Accepted Answer

A) higher inflation. 
B) lower inflation. 
C) no change in GDP. 
D) higher temporary GDP. 
A) higher inflation. 
B) lower inflation. 
C) no change in GDP. 
D) higher temporary GDP. B

Question 4

According to the Phillips curve, an increase in the level of output is associated with:

Accepted Answer

A) an increase in the expected inflation. 
B) a decrease in the nominal interest rate. 
C) a decrease in the rate of inflation. 
D) an increase in the rate of inflation. 
A) an increase in the expected inflation. 
B) a decrease in the nominal interest rate. 
C) a decrease in the rate of inflation. 
D) an increase in the rate of inflation.

Question 5

If the central bank decreases money supply, Ms, the LM curve will:

Accepted Answer

A) shift up. 
B) shift down. 
C) rotate. 
D) none of the above. 
A) shift up. 
B) shift down. 
C) rotate. 
D) none of the above.

Question 6

The demand for money increases in:

Accepted Answer

A) money supply. 
B) The nominal interest rate. 
C) income. 
D) all of the above. 
A) money supply. 
B) The nominal interest rate. 
C) income. 
D) all of the above.

Question 7

If the saving rate increases in the IS-MP model, then in the new equilibrium:

Accepted Answer

A) GDP increases. 
B) public spending will decrease. 
C) growth becomes positive. 
D) output declines. 
A) GDP increases. 
B) public spending will decrease. 
C) growth becomes positive. 
D) output declines.

Question 8

According to the IS-MP-PC model, a 1% increase in the policy interest rate leads to

Accepted Answer

A) an upward shifts of the AD curve. 
B) no change in the AD curve. 
C) a downward shift in the AD curve. 
D) a downward shift in the AS curve. 
A) an upward shifts of the AD curve. 
B) no change in the AD curve. 
C) a downward shift in the AD curve. 
D) a downward shift in the AS curve.

Question 9

In the IS-LM model, if investor sentiments become more optimistic, then:

Accepted Answer

A) output increases. 
B) output declines. 
C) the interest rate declines. 
D) none of the above. 
A) output increases. 
B) output declines. 
C) the interest rate declines. 
D) none of the above.

Question 10

In the IS-LM model the equilibrium level of GDP depends on:

Accepted Answer

A) the marginal propensity to consume. 
B) public expenditure. 
C) money supply. 
D) all of the above. 
A) the marginal propensity to consume. 
B) public expenditure. 
C) money supply. 
D) all of the above.

Question 11

In the IS-MP model, if the marginal propensity to consume increases, then in equilibrium:

Accepted Answer

A) Investment decreases. 
B) The real interest rate rises. 
C) output increases. 
D) all of the above. 
A) Investment decreases. 
B) The real interest rate rises. 
C) output increases. 
D) all of the above.

Question 12

According to the IS-MP-PC model, a technological innovation leading to a higher long-run level of output causes

Accepted Answer

A) higher inflation. 
B) temporarily lower GDP. 
C) no change in GDP. 
D) higher GDP. 
A) higher inflation. 
B) temporarily lower GDP. 
C) no change in GDP. 
D) higher GDP.

Question 13

If sentiments deteriorate in the IS-MP model, then GDP decreases by:

Accepted Answer

A) less than in the IS-LM model. 
B) the same as in the IS-LM model. 
C) more than in the IS-LM model. 
D) none of the above. 
A) less than in the IS-LM model. 
B) the same as in the IS-LM model. 
C) more than in the IS-LM model. 
D) none of the above.

Question 14

A higher long-run level of output shifts the AS curve down.

Accepted Answer

A) True 
 B)False

Question 15

According to the IS-MP-PC model, a decrease in the long-run level of output causes

Accepted Answer

A) an upward shift of the AS curve. 
B) an upward shift of the AD curve. 
C) a downward shift of the AS curve. 
D) none of the above. 
A) an upward shift of the AS curve. 
B) an upward shift of the AD curve. 
C) a downward shift of the AS curve. 
D) none of the above.

Question 16

If the policy interest rate increases, then the MP curve shifts down.

Accepted Answer

A) True 
 B)False

Question 17

According to the IS-MP-PC model, a lower level of past inflation causes

Accepted Answer

A) a lower current GDP. 
B) a higher current inflation. 
C) a higher current GDP. 
D) none of the above. 
A) a lower current GDP. 
B) a higher current inflation. 
C) a higher current GDP. 
D) none of the above.

Question 18

In the IS-MP model, if the policy interest rate increases, then in equilibrium:

Accepted Answer

A) output increases 
B) consumption decreases. 
C) investment rises. 
D) all of the above. 
A) output increases 
B) consumption decreases. 
C) investment rises. 
D) all of the above.

Question 19

According to the IS-MP-PC model, a negative temporary investor sentiment shock will cause

Accepted Answer

A) permanently higher GDP 
B) temporarily lower GDP. 
C) permanently higher inflation 
D) temporarily higher inflation. 
A) permanently higher GDP 
B) temporarily lower GDP. 
C) permanently higher inflation 
D) temporarily higher inflation.

Question 20

If both government expenditure, G, and taxation, T, increase by the same amount, so that government deficit or surplus does not change, then in the new equilibrium:

Accepted Answer

A) output remains constant. 
B) the interest rate declines. 
C) output increases. 
D) none of the above. 
A) output remains constant. 
B) the interest rate declines. 
C) output increases. 
D) none of the above.

If both government expenditure, G, and taxation, T, increase by the same amount, the IS curve will:

In the IS-LM model the equilibrium level of the interest rate depends on:

According to the IS-MP-PC model, a decrease in taxation, T, accompanied by an identical reduction in public expenditure, G, causes

According to the Phillips curve, an increase in the level of output is associated with:

If the central bank decreases money supply, M^s, the LM curve will:

The demand for money increases in:

If the saving rate increases in the IS-MP model, then in the new equilibrium:

According to the IS-MP-PC model, a 1% increase in the policy interest rate leads to

In the IS-LM model, if investor sentiments become more optimistic, then:

In the IS-LM model the equilibrium level of GDP depends on:

In the IS-MP model, if the marginal propensity to consume increases, then in equilibrium:

According to the IS-MP-PC model, a technological innovation leading to a higher long-run level of output causes

If sentiments deteriorate in the IS-MP model, then GDP decreases by:

A higher long-run level of output shifts the AS curve down.

According to the IS-MP-PC model, a decrease in the long-run level of output causes

If the policy interest rate increases, then the MP curve shifts down.

According to the IS-MP-PC model, a lower level of past inflation causes

In the IS-MP model, if the policy interest rate increases, then in equilibrium:

According to the IS-MP-PC model, a negative temporary investor sentiment shock will cause

If both government expenditure, G, and taxation, T, increase by the same amount, so that government deficit or surplus does not change, then in the new equilibrium:

Thinking About Macroeconomics

National-Income Accounting: Gross Domestic Product and the Price Level

Introduction to Economic Growth

Working With the Solow Growth Model

Conditional Convergence and Long-Run Economic Growth

Markets, Prices, Supply, and Demand

Consumption, Saving, and Investment

An Equilibrium Business-Cycle Model

Capital Utilization and Unemployment

The Demand for Money and the Price Level

Inflation, Money Growth, and Interest Rates

Government Expenditure

Taxes

Public Debt

Money and Business Cycles I: the Price-Misperceptions Model

Money and Business Cycles Ii: Sticky Prices and Nominal Wage Rates

World Markets in Goods and Credit

Exchange Rates

Filters

Exam 6: Macroeconomics Without Microeconomic Foundations

If both government expenditure, G, and taxation, T, increase by the same amount, the IS curve will:

In the IS-LM model the equilibrium level of the interest rate depends on:

According to the IS-MP-PC model, a decrease in taxation, T, accompanied by an identical reduction in public expenditure, G, causes

According to the Phillips curve, an increase in the level of output is associated with:

If the central bank decreases money supply, Ms, the LM curve will:

The demand for money increases in:

If the saving rate increases in the IS-MP model, then in the new equilibrium:

According to the IS-MP-PC model, a 1% increase in the policy interest rate leads to

In the IS-LM model, if investor sentiments become more optimistic, then:

In the IS-LM model the equilibrium level of GDP depends on:

In the IS-MP model, if the marginal propensity to consume increases, then in equilibrium:

According to the IS-MP-PC model, a technological innovation leading to a higher long-run level of output causes

If sentiments deteriorate in the IS-MP model, then GDP decreases by:

A higher long-run level of output shifts the AS curve down.

According to the IS-MP-PC model, a decrease in the long-run level of output causes

If the policy interest rate increases, then the MP curve shifts down.

According to the IS-MP-PC model, a lower level of past inflation causes

In the IS-MP model, if the policy interest rate increases, then in equilibrium:

According to the IS-MP-PC model, a negative temporary investor sentiment shock will cause

If both government expenditure, G, and taxation, T, increase by the same amount, so that government deficit or surplus does not change, then in the new equilibrium:

Thinking About Macroeconomics

National-Income Accounting: Gross Domestic Product and the Price Level

Introduction to Economic Growth

Working With the Solow Growth Model

Conditional Convergence and Long-Run Economic Growth

Markets, Prices, Supply, and Demand

Consumption, Saving, and Investment

An Equilibrium Business-Cycle Model

Capital Utilization and Unemployment

The Demand for Money and the Price Level

Inflation, Money Growth, and Interest Rates

Government Expenditure

Taxes

Public Debt

Money and Business Cycles I: the Price-Misperceptions Model

Money and Business Cycles Ii: Sticky Prices and Nominal Wage Rates

World Markets in Goods and Credit

Exchange Rates

Filters

If the central bank decreases money supply, M^s, the LM curve will: