Question 1

In the IS-MP analysis in the Fed model, an increase in net exports will shift the:

Accepted Answer

A) MP curve up. 
B) MP curve down. 
C) IS curve to the left. 
D) IS curve to the right. 
A) MP curve up. 
B) MP curve down. 
C) IS curve to the left. 
D) IS curve to the right.

Question 2

If a spending shock increases aggregate expenditure by $35 billion and the multiplier is 2.5, then the IS curve will shift:

Accepted Answer

A) left by $35 billion. 
B) left by $14 billion. 
C) right by $87.5 billion. 
D) right by $35 billion. 
A) left by $35 billion. 
B) left by $14 billion. 
C) right by $87.5 billion. 
D) right by $35 billion.

Question 3

If you see a newspaper headline that says "U.S. exports plunge," this is an example of _____ shock.

Accepted Answer

A) a spending 
B) an interest rate 
C) a financial 
D) a supply 
A) a spending 
B) an interest rate 
C) a financial 
D) a supply

Question 4

Which of the following graphs correctly represents a negative supply shock on the Phillips curve?

Accepted Answer

A) 
  
B) 
  
C) 
  
D) 
  
A) 
  
B) 
  
C) 
  
D)

Question 5

Suppose net exports fall in South Africa. Analyze this shock graphically, and explain using the Fed model.

Accepted Answer

The answer of Suppose net exports fall in South Africa....

Question 6

If you see a newspaper headline that says "Oil prices rise sharply," this is an example of _____ shock.

Accepted Answer

A) a spending 
B) an interest rate 
C) a financial 
D) a supply 
A) a spending 
B) an interest rate 
C) a financial 
D) a supply

Question 7

Graphically depict how supply shocks affect the Phillips curve.

Accepted Answer

The answer of Graphically depict how supply shocks affect the...

Question 8

If a spending shock reduces aggregate expenditure by $600 million and the multiplier is 2.5, then the IS curve will shift:

Accepted Answer

A) right by $240 million. 
B) left by $1,500 million. 
C) left by $600 million. 
D) right by $600 million. 
A) right by $240 million. 
B) left by $1,500 million. 
C) left by $600 million. 
D) right by $600 million.

Question 9

Take a look at the IS-MP-PC model shown here. At equilibrium, the output gap is:

Accepted Answer

A) 5%. 
B) 3%. 
C) -4%. 
D) -1%. 
A) 5%. 
B) 3%. 
C) -4%. 
D) -1%.

Question 10

If the real interest rate rises in the economy, what kind of shock does the economy experience? Which curve in the Fed model is affected, and in which direction does the curve shift?

Accepted Answer

The answer of If the real interest rate rises in...

Question 11

In the IS-MP analysis in the Fed model, if the Federal Reserve raises the federal funds rate, the:

Accepted Answer

A) IS curve shifts to the left. 
B) IS curve shifts to the right. 
C) MP curve shifts up. 
D) MP curve shifts down. 
A) IS curve shifts to the left. 
B) IS curve shifts to the right. 
C) MP curve shifts up. 
D) MP curve shifts down.

Question 12

In the IS-MP analysis in the Fed model, an increase in imports will shift the:

Accepted Answer

A) MP curve up. 
B) MP curve down. 
C) IS curve to the left. 
D) IS curve to the right. 
A) MP curve up. 
B) MP curve down. 
C) IS curve to the left. 
D) IS curve to the right.

Question 13

In 2017, nearly 3.5% of Vietnamese imports constituted of refined oil. If the price of oil rises significantly, what effect does this have on the Phillips curve in Vietnam?

Accepted Answer

A) 
  
B) 
  
C) 
  
D) 
  
A) 
  
B) 
  
C) 
  
D)

Question 14

In the IS-MP analysis in the Fed model, a fall in the interest rate causes a:

Accepted Answer

A) right shift of the IS curve. 
B) movement to the left along the IS curve. 
C) left shift of the IS curve. 
D) movement to the right along the IS curve. 
A) right shift of the IS curve. 
B) movement to the left along the IS curve. 
C) left shift of the IS curve. 
D) movement to the right along the IS curve.

Question 15

Assume that the economy starts at a 0% output gap. Now suppose that banks begin to fear the risk of default and the risk premium rises by 2%. Which of the following figures shows what happens in this scenario?
​
Figure A
  ​
Figure B
  ​
Figure C
  ​
Figure D

Accepted Answer

A) Figure A (no change) 
B) Figure B (an upward shift of the MP curve and a new interest rate of 3%) 
C) Figure C (a leftward shift of the IS curve and an output gap of -4%) 
D) Figure D (an upward shift of the Phillips curve and 1% unexpected inflation) 
A) Figure A (no change) 
B) Figure B (an upward shift of the MP curve and a new interest rate of 3%) 
C) Figure C (a leftward shift of the IS curve and an output gap of -4%) 
D) Figure D (an upward shift of the Phillips curve and 1% unexpected inflation)

Question 16

If a spending shock increases aggregate expenditure by $75 million and the multiplier is 3, then the IS curve will shift:

Accepted Answer

A) right by $225 million. 
B) left by $225 million. 
C) left by $75 million. 
D) right by $75 million. 
A) right by $225 million. 
B) left by $225 million. 
C) left by $75 million. 
D) right by $75 million.

Question 17

The Fed model links the IS, MP, and Phillips curves. In the IS-MP analysis, an increase in exports will shift the:

Accepted Answer

A) MP curve up. 
B) MP curve down. 
C) IS curve to the left. 
D) IS curve to the right. 
A) MP curve up. 
B) MP curve down. 
C) IS curve to the left. 
D) IS curve to the right.

Question 18

Suppose the government increases taxes on corporations. Analyze this shock graphically, and explain using the Fed model.

Accepted Answer

The answer of Suppose the government increases taxes on corporations....

Question 19

Which of the following graphs correctly represents the effect on the MP curve if there is a rise in liquidity risk in the United States?

Accepted Answer

A) 
  
B) 
  
C) 
  
D) 
  
A) 
  
B) 
  
C) 
  
D)

Question 20

Take a look at the IS-MP-PC model shown here. If the expected inflation rate is 2%, the actual inflation rate is:

Accepted Answer

A) 1%. 
B) -1%. 
C) 3%. 
D) 2%. 
A) 1%. 
B) -1%. 
C) 3%. 
D) 2%.

Exam 32: The Fed Model: Linking Interest Rates, Output, and Inflation

In the IS-MP analysis in the Fed model, an increase in net exports will shift the:

If a spending shock increases aggregate expenditure by $35 billion and the multiplier is 2.5, then the IS curve will shift:

If you see a newspaper headline that says "U.S. exports plunge," this is an example of _____ shock.

Which of the following graphs correctly represents a negative supply shock on the Phillips curve?

Suppose net exports fall in South Africa. Analyze this shock graphically, and explain using the Fed model.

If you see a newspaper headline that says "Oil prices rise sharply," this is an example of _____ shock.

Graphically depict how supply shocks affect the Phillips curve.

If a spending shock reduces aggregate expenditure by $600 million and the multiplier is 2.5, then the IS curve will shift:

Take a look at the IS-MP-PC model shown here. At equilibrium, the output gap is:

If the real interest rate rises in the economy, what kind of shock does the economy experience? Which curve in the Fed model is affected, and in which direction does the curve shift?

In the IS-MP analysis in the Fed model, if the Federal Reserve raises the federal funds rate, the:

In the IS-MP analysis in the Fed model, an increase in imports will shift the:

In 2017, nearly 3.5% of Vietnamese imports constituted of refined oil. If the price of oil rises significantly, what effect does this have on the Phillips curve in Vietnam?

In the IS-MP analysis in the Fed model, a fall in the interest rate causes a:

Assume that the economy starts at a 0% output gap. Now suppose that banks begin to fear the risk of default and the risk premium rises by 2%. Which of the following figures shows what happens in this scenario? ​ Figure A ​ Figure B ​ Figure C ​ Figure D

If a spending shock increases aggregate expenditure by $75 million and the multiplier is 3, then the IS curve will shift:

The Fed model links the IS, MP, and Phillips curves. In the IS-MP analysis, an increase in exports will shift the:

Suppose the government increases taxes on corporations. Analyze this shock graphically, and explain using the Fed model.

Which of the following graphs correctly represents the effect on the MP curve if there is a rise in liquidity risk in the United States?

Take a look at the IS-MP-PC model shown here. If the expected inflation rate is 2%, the actual inflation rate is:

The Core Principles of Economics

Demand: Thinking Like a Buyer

Supply: Thinking Like a Seller

Equilibrium: Where Supply Meets Demand

Elasticity: Measuring Responsiveness

When Governments Intervene in Markets

Welfare and Efficiency

Gains From Trade

International Trade

Externalities and Public Goods

Labor Demand and Supply

Wages, Workers, and Management

Inequality, Social Insurance, and Redistribution

Market Structure and Market Power

Entry, Exit, and Long-Run Profitability

Business Strategy

Sophisticated Pricing Strategies

Game Theory and Strategic Choices

Decisions Involving Uncertainty

Decisions With Private Information

Sizing up the Economy Using Gdp

Economic Growth

Unemployment

Inflation and Money

Consumption and Saving

Investment

The Financial Sector

International Finance and the Exchange Rate

Business Cycles

IS-MP Analysis: Interest Rates and Output

Phillips Curve

Aggregate Demand and Aggregate Supply

Monetary Policy

Government Spending, Taxes, and Fiscal Policy

Appendix: Aggregate Expenditure and the Multiplier

Filters

Assume that the economy starts at a 0% output gap. Now suppose that banks begin to fear the risk of default and the risk premium rises by 2%. Which of the following figures shows what happens in this scenario? Figure A Figure B Figure C Figure D