Question 1

If the money supply is increased,which curve shifts in the IS-LM model? What direction does it shift? What is the intuition behind this shift?

Accepted Answer

An increase in the money supply shifts t

Question 2

An increase in the expected future marginal product of capital 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) remain unchanged if firms face borrowing constraints; otherwise, shift down and to the left. 
A) shift up and to the right. 
B) shift down and to the left. 
C) remain unchanged. 
D) remain unchanged if firms face borrowing constraints; otherwise, shift down and to the left.

Question 3

Use the IS-LM model to determine the effects of each of the following on the general equilibrium values of the real wage,employment,output,the real interest rate,consumption,investment,and the price level.
(a)Tougher immigration laws reduce the working-age population.
(b)There's increased volatility in the prices of stocks and bonds.
(c)The government tries to achieve tax equity by an increase in the corporate tax rate.
(d)Increased computerization reduces stock market brokerage costs.

Accepted Answer

(a)The decline in labor supply increases

Question 4

The IS-LM model predicts that a temporary beneficial supply shock

Accepted Answer

A) increases output, national saving, and investment, but not the real interest rate. 
B) increases output, national saving, and the real interest rate, but not investment. 
C) increases the real interest rate, investment, and output, but not national saving. 
D) increases output, national saving, investment, and the real interest rate. 
A) increases output, national saving, and investment, but not the real interest rate. 
B) increases output, national saving, and the real interest rate, but not investment. 
C) increases the real interest rate, investment, and output, but not national saving. 
D) increases output, national saving, investment, and the real interest rate.

Question 5

An increase in wealth 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 6

An increase in the effective tax rate on capital 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) remain unchanged if taxes are fully deductible from income; otherwise, shift up and to the right. 
A) shift up and to the right. 
B) shift down and to the left. 
C) remain unchanged. 
D) remain unchanged if taxes are fully deductible from income; otherwise, shift up and to the right.

Question 7

An increase in wealth that doesn't affect labor supply would cause the IS curve to ________ and the FE line to ________.

Accepted Answer

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

Question 8

A rise in the price of a bond causes the yield of the bond to

Accepted Answer

A) rise. 
B) fall. 
C) remain unchanged. 
D) rise if it's a short-term bond, fall if it's a long-term bond. 
A) rise. 
B) fall. 
C) remain unchanged. 
D) rise if it's a short-term bond, fall if it's a long-term bond.

Question 9

A temporary decrease in government purchases 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 10

Keynesian economists think general equilibrium is not attained quickly because

Accepted Answer

A) the real interest rate adjusts slowly. 
B) the level of output adjusts slowly. 
C) the real wage rate adjusts slowly. 
D) the price level adjusts slowly. 
A) the real interest rate adjusts slowly. 
B) the level of output adjusts slowly. 
C) the real wage rate adjusts slowly. 
D) the price level adjusts slowly.

Question 11

A temporary adverse supply shock directly causes

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 down and to the right of the LM curve. 
D) a shift up 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 down and to the right of the LM curve. 
D) a shift up and to the right of the IS curve.

Question 12

For each of the following changes,what happens to the real interest rate and output in the very short run,before the price level has adjusted to restore general equilibrium?
(a)Wealth rises.
(b)Money supply rises.
(c)The future marginal productivity of capital increases.
(d)Expected inflation declines.
(e)Future income declines.

Accepted Answer

(a)The IS curve shifts up and to the rig

Question 13

A change that increases real money demand relative to the real money supply causes

Accepted Answer

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

Question 14

Which of the following changes shifts the AD curve down and to the left?

Accepted Answer

A) A decline in the nominal money supply 
B) A decrease in income taxes 
C) A decrease in the risk on nonmonetary assets 
D) An increase in the future marginal productivity of capital 
A) A decline in the nominal money supply 
B) A decrease in income taxes 
C) A decrease in the risk on nonmonetary assets 
D) An increase in the future marginal productivity of capital

Question 15

Analyze the following statement,and show what would happen in the long run if such advice were followed by the Fed: "The increase in the stock market has increased people's wealth.As a result,their consumption has increased,increasing aggregate demand and output.So the Fed needs to increase the money supply,since with higher income,people's demand for real money balances will be higher."

Accepted Answer

Assuming resources are fully utilized,th

Question 16

The aggregate demand curve shows the combinations of output and the price level that put the economy on

Accepted Answer

A) the FE line and the IS curve. 
B) the FE line, the IS curve, and the LM curve. 
C) the IS curve. 
D) the IS curve and the LM curve. 
A) the FE line and the IS curve. 
B) the FE line, the IS curve, and the LM curve. 
C) the IS curve. 
D) the IS curve and the LM curve.

Question 17

An increase in expected inflation causes the real interest rate to ________ and output to ________ in the short run,before prices adjust to restore 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 18

The IS curve

Accepted Answer

A) is horizontal. 
B) is vertical. 
C) slopes downward. 
D) slopes upward. 
A) is horizontal. 
B) is vertical. 
C) slopes downward. 
D) slopes upward.

Question 19

An adverse supply shock that is permanent shifts which curve in addition to the curves shifted by one that is temporary?

Accepted Answer

A) The LM curve 
B) The IS curve 
C) The FE line 
D) The labor demand curve 
A) The LM curve 
B) The IS curve 
C) The FE line 
D) The labor demand curve

Question 20

The probably effect of introducing an increased number of automatic teller machines is to

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.

If the money supply is increased,which curve shifts in the IS-LM model? What direction does it shift? What is the intuition behind this shift?

An increase in the expected future marginal product of capital would cause the IS curve to

The IS-LM model predicts that a temporary beneficial supply shock

An increase in wealth would cause the IS curve to

An increase in the effective tax rate on capital would cause the IS curve to

An increase in wealth that doesn't affect labor supply would cause the IS curve to and the FE line to .

A rise in the price of a bond causes the yield of the bond to

A temporary decrease in government purchases causes the real interest rate to and the price level to in general equilibrium.

Keynesian economists think general equilibrium is not attained quickly because

A temporary adverse supply shock directly causes

A change that increases real money demand relative to the real money supply causes

Which of the following changes shifts the AD curve down and to the left?

The aggregate demand curve shows the combinations of output and the price level that put the economy on

An increase in expected inflation causes the real interest rate to and output to in the short run,before prices adjust to restore equilibrium.

The IS curve

An adverse supply shock that is permanent shifts which curve in addition to the curves shifted by one that is temporary?

The probably effect of introducing an increased number of automatic teller machines is 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

If the money supply is increased,which curve shifts in the IS-LM model? What direction does it shift? What is the intuition behind this shift?

An increase in the expected future marginal product of capital would cause the IS curve to

The IS-LM model predicts that a temporary beneficial supply shock

An increase in wealth would cause the IS curve to

An increase in the effective tax rate on capital would cause the IS curve to

An increase in wealth that doesn't affect labor supply would cause the IS curve to ________ and the FE line to ________.

A rise in the price of a bond causes the yield of the bond to

A temporary decrease in government purchases causes the real interest rate to ________ and the price level to ________ in general equilibrium.

Keynesian economists think general equilibrium is not attained quickly because

A temporary adverse supply shock directly causes

A change that increases real money demand relative to the real money supply causes

Which of the following changes shifts the AD curve down and to the left?

The aggregate demand curve shows the combinations of output and the price level that put the economy on

An increase in expected inflation causes the real interest rate to ________ and output to ________ in the short run,before prices adjust to restore equilibrium.

The IS curve

An adverse supply shock that is permanent shifts which curve in addition to the curves shifted by one that is temporary?

The probably effect of introducing an increased number of automatic teller machines is 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

An increase in wealth that doesn't affect labor supply would cause the IS curve to and the FE line to .

A temporary decrease in government purchases causes the real interest rate to and the price level to in general equilibrium.

An increase in expected inflation causes the real interest rate to and output to in the short run,before prices adjust to restore equilibrium.