Exam 30: IS-MP Analysis: Interest Rates and Output

Which of the following changes could create a more positive output gap in an economy? (i) Government spending increases. (ii) There is a reduction in taxes. (iii) The risk premium increases. (iv) The default rates on loans falls.

Planned investment is the:

If Y > AE:

If government expenditure rises by $27.5 billion and the multiplier in the economy is 2.5, then:

If potential GDP is $7.04 trillion and actual GDP is $6.93 trillion, the output gap is:

Which of the following shows the correct effect on the IS-MP framework if there is an increase in the risk premium in an economy?

If Y < AE:

If the real rate of interest is 3.7% and the risk-free rate is 2%, the risk premium is:

Which of the following cause shifts in the MP curve?

The output gap is zero when:

In each case below, draw the IS curve to show the effect of the change in fiscal policy. (a) Existing investment tax credits are removed. (b) Higher taxes are imposed on most income tax brackets. (c) New green technologies are installed in government departments and buildings.

Suppose that with a real interest rate of 3%, no output gap exists in the economy. If the real interest rate is above 3%, the economic forecast predicts:

In a closed economy, the equation for aggregate expenditure is:

The difference between the three-month interbank loan interest rate and the interest rate on short-term U.S. government debt is the:

If potential GDP is $990 billion and actual GDP is $990 billion, the output gap is:

The Dow Jones Industrial Average rose more than 1,080 points on December 26, 2018. How does a change like this impact the IS curve?

A fiscal policy contraction would lead to:

Which of the following is an example of government expenditure? (i) military spending (ii) interstate highway construction (iii) construction of a new factory

If government spending rises by $1.2 trillion and GDP rises by $2.2 billion, then the multiplier in the economy is approximately:

The intersection of the IS curve and the MP curve determine: