Question 1

In classical IS-LM analysis,the effects of a decline in desired investment include

Accepted Answer

A) a decline in output. 
B) an increase in the price level. 
C) a decline in the real interest rate. 
D) an increase in unemployment. 
A) a decline in output. 
B) an increase in the price level. 
C) a decline in the real interest rate. 
D) an increase in unemployment. C

Question 2

A temporary decline in productivity would cause the IS curve to

Accepted Answer

A) shift up and to the right. 
B) shift down and to the left. 
C) remain unchanged. 
D) shift up and to the right only if people face borrowing constraints. 
A) shift up and to the right. 
B) shift down and to the left. 
C) remain unchanged. 
D) shift up and to the right only if people face borrowing constraints. C

Question 3

A decrease in the money supply would cause the IS curve to ________ and the LM curve to ________.

Accepted Answer

A) shift down and to the left; be unchanged 
B) shift down and to the left; shift up and to the left 
C) be unchanged; shift up and to the left 
D) be unchanged; shift down and to the right 
A) shift down and to the left; be unchanged 
B) shift down and to the left; shift up and to the left 
C) be unchanged; shift up and to the left 
D) be unchanged; shift down and to the right C

Question 4

You have just read that Australia has suffered a drought,destroying its wheat crop for this year.The effect of this adverse supply shock on Australia would probably be

Accepted Answer

A) an increase in prices and an increase in real interest rates. 
B) an increase in prices, an increase in nominal interest rates, but a decrease in real interest rates. 
C) a decrease in prices and a decrease in real interest rates. 
D) a decrease in prices, a decrease in nominal interest rates, but an increase in real interest rates. 
A) an increase in prices and an increase in real interest rates. 
B) an increase in prices, an increase in nominal interest rates, but a decrease in real interest rates. 
C) a decrease in prices and a decrease in real interest rates. 
D) a decrease in prices, a decrease in nominal interest rates, but an increase in real interest rates.

Question 5

An increase in the money supply would cause the FE line to

Accepted Answer

A) shift to the right. 
B) shift to the left. 
C) remain unchanged. 
D) remain unchanged if Ricardian equivalence holds; otherwise, shift to the right. 
A) shift to the right. 
B) shift to the left. 
C) remain unchanged. 
D) remain unchanged if Ricardian equivalence holds; otherwise, shift to the right.

Question 6

Suppose the Federal Reserve's short-run response to any change in the economy is to change the money supply to maintain the existing real interest rate.What would happen to money supply if there were a reduction in government purchases? Given the Fed's policy,what would happen in the very short run (before general equilibrium is restored)to output and the real interest rate? What must happen to the LM curve and the price level to restore general equilibrium?

Accepted Answer

The decrease in G shifts the IS curve do

Question 7

The IS curve would unambiguously shift up and to the right if there were

Accepted Answer

A) an increase in both government purchases and corporate taxes. 
B) an increase in both government purchases and the expected future marginal product of capital. 
C) an increase in the expected future marginal product of capital and a decrease in expected future output. 
D) a decrease in both corporate taxes and the expected future marginal product of capital. 
A) an increase in both government purchases and corporate taxes. 
B) an increase in both government purchases and the expected future marginal product of capital. 
C) an increase in the expected future marginal product of capital and a decrease in expected future output. 
D) a decrease in both corporate taxes and the expected future marginal product of capital.

Question 8

An increase in taxes (when Ricardian equivalence doesn't hold)causes the real interest rate to ________ and the price level to ________ in general equilibrium.

Accepted Answer

A) rise; rise 
B) rise; fall 
C) fall; rise 
D) fall; fall 
A) rise; rise 
B) rise; fall 
C) fall; rise 
D) fall; fall

Question 9

A decline in expected future output would cause the IS curve to

Accepted Answer

A) shift up and to the right. 
B) shift down and to the left. 
C) remain unchanged. 
D) shift up and to the right only if people face borrowing constraints. 
A) shift up and to the right. 
B) shift down and to the left. 
C) remain unchanged. 
D) shift up and to the right only if people face borrowing constraints.

Question 10

The FE line shows the level of output at which the ________ market is in equilibrium.

Accepted Answer

A) Goods 
B) Asset 
C) Labor 
D) Money 
A) Goods 
B) Asset 
C) Labor 
D) Money

Question 11

The Fed has announced that it plans to lower the rate of monetary growth from 10% per year to 2% per year.You would expect this announcement to directly

Accepted Answer

A) increase money demand, shifting the LM curve up and to the left. 
B) increase money demand, shifting the LM curve down and to the right. 
C) decrease money demand, shifting the LM curve up and to the left. 
D) decrease money demand, shifting the LM curve down and to the right. 
A) increase money demand, shifting the LM curve up and to the left. 
B) increase money demand, shifting the LM curve down and to the right. 
C) decrease money demand, shifting the LM curve up and to the left. 
D) decrease money demand, shifting the LM curve down and to the right.

Question 12

When the money supply declines by 10%,in the long run,output ________ and the price level ________.

Accepted Answer

A) is unchanged; is unchanged 
B) declines; falls 
C) is unchanged; falls 
D) declines; is unchanged 
A) is unchanged; is unchanged 
B) declines; falls 
C) is unchanged; falls 
D) declines; is unchanged

Question 13

Calculate the real money supply growth rate when the nominal money supply increases by 10% and the price level increases by each of the following percentages: a)2%; b)8%; c)10%; d)15%.

Accepted Answer

Real money supply growth rate = nominal

Question 14

The aggregate demand curve shows

Accepted Answer

A) the demand for goods depending on the relative price of goods compared to financial assets. 
B) the amount of output that can be obtained given the current production function in the economy. 
C) the relation between the aggregate quantity of goods demanded and the price level. 
D) the relation between the real interest rate and output when the goods market clears. 
A) the demand for goods depending on the relative price of goods compared to financial assets. 
B) the amount of output that can be obtained given the current production function in the economy. 
C) the relation between the aggregate quantity of goods demanded and the price level. 
D) the relation between the real interest rate and output when the goods market clears.

Question 15

After a temporary adverse supply shock hits the economy,general equilibrium is restored by

Accepted Answer

A) a shift down and to the left of the IS curve. 
B) a shift to the left of the FE line. 
C) a shift up and to the left of the LM curve. 
D) a shift down and to the right of the IS curve. 
A) a shift down and to the left of the IS curve. 
B) a shift to the left of the FE line. 
C) a shift up and to the left of the LM curve. 
D) a shift down and to the right of the IS curve.

Question 16

Keynesian economists believe that in the short run

Accepted Answer

A) money neutrality exists and prices adjust rapidly. 
B) money neutrality does not exist and prices adjust rapidly. 
C) money neutrality exists and prices do not adjust rapidly. 
D) money neutrality does not exist and prices do not adjust rapidly. 
A) money neutrality exists and prices adjust rapidly. 
B) money neutrality does not exist and prices adjust rapidly. 
C) money neutrality exists and prices do not adjust rapidly. 
D) money neutrality does not exist and prices do not adjust rapidly.

Question 17

Suppose the intersection of the IS and LM curves is to the right of the FE line.What would most likely eliminate a disequilibrium among the asset,labor,and goods markets?

Accepted Answer

A) A rise in the price level, shifting the LM curve up and to the left. 
B) A fall in the price level, shifting the LM curve down and to the right. 
C) A rise in the price level, shifting the IS curve up and to the right. 
D) A fall in the price level, shifting the IS curve down and to the left. 
A) A rise in the price level, shifting the LM curve up and to the left. 
B) A fall in the price level, shifting the LM curve down and to the right. 
C) A rise in the price level, shifting the IS curve up and to the right. 
D) A fall in the price level, shifting the IS curve down and to the left.

Question 18

The aggregate supply curve shows the relation between

Accepted Answer

A) the real interest rate and the aggregate amount of output that firms supply. 
B) the price level and the aggregate amount of output that firms supply. 
C) the supply of goods by firms and the price of goods relative to the price of nonmonetary assets. 
D) the inflation rate and the unemployment rate. 
A) the real interest rate and the aggregate amount of output that firms supply. 
B) the price level and the aggregate amount of output that firms supply. 
C) the supply of goods by firms and the price of goods relative to the price of nonmonetary assets. 
D) the inflation rate and the unemployment rate.

Question 19

Which of the following changes shifts the SRAS curve up?

Accepted Answer

A) A decrease in the labor force 
B) A decrease in the money supply 
C) An increase in government purchases 
D) An increase in firms' costs 
A) A decrease in the labor force 
B) A decrease in the money supply 
C) An increase in government purchases 
D) An increase in firms' costs

Question 20

A beneficial supply shock would cause the FE line to

Accepted Answer

A) shift to the right. 
B) shift to the left. 
C) remain unchanged. 
D) remain unchanged if the shock is temporary; shift to the right if the shock is permanent. 
A) shift to the right. 
B) shift to the left. 
C) remain unchanged. 
D) remain unchanged if the shock is temporary; shift to the right if the shock is permanent.

In classical IS-LM analysis,the effects of a decline in desired investment include

A temporary decline in productivity would cause the IS curve to

A decrease in the money supply would cause the IS curve to and the LM curve to .

You have just read that Australia has suffered a drought,destroying its wheat crop for this year.The effect of this adverse supply shock on Australia would probably be

An increase in the money supply would cause the FE line to

The IS curve would unambiguously shift up and to the right if there were

An increase in taxes (when Ricardian equivalence doesn't hold)causes the real interest rate to and the price level to in general equilibrium.

A decline in expected future output would cause the IS curve to

The FE line shows the level of output at which the ________ market is in equilibrium.

The Fed has announced that it plans to lower the rate of monetary growth from 10% per year to 2% per year.You would expect this announcement to directly

When the money supply declines by 10%,in the long run,output and the price level .

Calculate the real money supply growth rate when the nominal money supply increases by 10% and the price level increases by each of the following percentages: a)2%; b)8%; c)10%; d)15%.

The aggregate demand curve shows

After a temporary adverse supply shock hits the economy,general equilibrium is restored by

Keynesian economists believe that in the short run

Suppose the intersection of the IS and LM curves is to the right of the FE line.What would most likely eliminate a disequilibrium among the asset,labor,and goods markets?

The aggregate supply curve shows the relation between

Which of the following changes shifts the SRAS curve up?

A beneficial supply shock would cause the FE line to

Introduction to Macroeconomics

The Measurement and Structure of the National Economy

Productivity, output, and Employment

Consumption, saving, and Investment

Saving and Investment in the Open Economy

Long-Run Economic Growth

The Asset Market, money, and Prices

Business Cycles

Classical Business Cycle Analysis

Keynesianism: the Macroeconomics of Wage and Price Rigidity

Unemployment and Inflation

Exchange Rates, business Cycles, and Macroeconomic Policy in the Open Economy

Monetary Policy and the Federal Reserve System

Government Spending and Its Financing

Filters

Exam 9: The Is-Lmad-As Model

In classical IS-LM analysis,the effects of a decline in desired investment include

A temporary decline in productivity would cause the IS curve to

A decrease in the money supply would cause the IS curve to ________ and the LM curve to ________.

You have just read that Australia has suffered a drought,destroying its wheat crop for this year.The effect of this adverse supply shock on Australia would probably be

An increase in the money supply would cause the FE line to

The IS curve would unambiguously shift up and to the right if there were

An increase in taxes (when Ricardian equivalence doesn't hold)causes the real interest rate to ________ and the price level to ________ in general equilibrium.

A decline in expected future output would cause the IS curve to

The FE line shows the level of output at which the ________ market is in equilibrium.

The Fed has announced that it plans to lower the rate of monetary growth from 10% per year to 2% per year.You would expect this announcement to directly

When the money supply declines by 10%,in the long run,output ________ and the price level ________.

Calculate the real money supply growth rate when the nominal money supply increases by 10% and the price level increases by each of the following percentages: a)2%; b)8%; c)10%; d)15%.

The aggregate demand curve shows

After a temporary adverse supply shock hits the economy,general equilibrium is restored by

Keynesian economists believe that in the short run

Suppose the intersection of the IS and LM curves is to the right of the FE line.What would most likely eliminate a disequilibrium among the asset,labor,and goods markets?

The aggregate supply curve shows the relation between

Which of the following changes shifts the SRAS curve up?

A beneficial supply shock would cause the FE line to

Introduction to Macroeconomics

The Measurement and Structure of the National Economy

Productivity, output, and Employment

Consumption, saving, and Investment

Saving and Investment in the Open Economy

Long-Run Economic Growth

The Asset Market, money, and Prices

Business Cycles

Classical Business Cycle Analysis

Keynesianism: the Macroeconomics of Wage and Price Rigidity

Unemployment and Inflation

Exchange Rates, business Cycles, and Macroeconomic Policy in the Open Economy

Monetary Policy and the Federal Reserve System

Government Spending and Its Financing

Filters

A decrease in the money supply would cause the IS curve to and the LM curve to .

An increase in taxes (when Ricardian equivalence doesn't hold)causes the real interest rate to and the price level to in general equilibrium.

When the money supply declines by 10%,in the long run,output and the price level .