Question 1

A decrease 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 2

Which of the following would shift the FE line to the right?

Accepted Answer

A) An adverse supply shock 
B) An increase in labor supply 
C) A decrease in the capital stock 
D) An increase in the future marginal productivity of capital 
A) An adverse supply shock 
B) An increase in labor supply 
C) A decrease in the capital stock 
D) An increase in the future marginal productivity of capital

Question 3

Suppose you were a forecaster of the real wage rate,employment,output,the real interest rate,consumption,investment,and the price level.A shock hits the economy,which you think is a temporary adverse supply shock.
(a)What are your forecasts for each of the variables listed above (rise,fall,and no change)?
(b)What if the shock was really due to people's reduced expectations about their future income.Which variables did you forecast correctly,and which did you forecast incorrectly?

Accepted Answer

(a)The real wage rate,employment,output,

Question 4

A temporary supply shock,such as an increase in oil prices,would

Accepted Answer

A) shift the IS curve down and to the left and leave the FE line unchanged. 
B) shift the IS curve down and to the left and shift the FE line to the left. 
C) shift the IS curve up and to the right, but leave the FE line unchanged. 
D) have no effect on the IS curve. 
A) shift the IS curve down and to the left and leave the FE line unchanged. 
B) shift the IS curve down and to the left and shift the FE line to the left. 
C) shift the IS curve up and to the right, but leave the FE line unchanged. 
D) have no effect on the IS curve.

Question 5

Which of the following would shift the FE line to the right?

Accepted Answer

A) An adverse supply shock 
B) A decrease in labor supply 
C) An increase in the capital stock 
D) An increase in the future marginal productivity of capital 
A) An adverse supply shock 
B) A decrease in labor supply 
C) An increase in the capital stock 
D) An increase in the future marginal productivity of capital

Question 6

Describe the effects,in both the short run and the long run,of an increase in the money supply.Explain what happens to real output and the price level.

Accepted Answer

In the short run,an increase in the mone

Question 7

Looking at the macroeconomic statistics for Friedmanland,you discover that at the beginning of the year,the national money supply was equal to $400 million and by the end of the year it was equal to $420 million.You also found out that the inflation rate in Friedmanland was 7%.In this case,you would expect the LM curve to

Accepted Answer

A) shift up and to the left as the real money supply falls. 
B) shift up and to the left as the real money supply rises. 
C) shift down and to the right as the real money supply falls. 
D) shift down and to the right as the real money supply rises. 
A) shift up and to the left as the real money supply falls. 
B) shift up and to the left as the real money supply rises. 
C) shift down and to the right as the real money supply falls. 
D) shift down and to the right as the real money supply rises.

Question 8

An increase in the money supply 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 9

Which of the following changes shifts the SRAS curve up?

Accepted Answer

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

Question 10

A decline 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 11

Under an assumption of monetary neutrality,a change in the nominal money supply has

Accepted Answer

A) no effect on the price level. 
B) a less than proportionate effect on the price level. 
C) a proportionate effect on the price level. 
D) a more than proportionate effect on the price level. 
A) no effect on the price level. 
B) a less than proportionate effect on the price level. 
C) a proportionate effect on the price level. 
D) a more than proportionate effect on the price level.

Question 12

A decrease in money supply 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 13

Which of the following changes shifts the AD curve up and to the right?

Accepted Answer

A) A temporary decrease in government purchases 
B) A decline in the nominal money supply 
C) An increase in corporate taxes 
D) An increase in consumer confidence 
A) A temporary decrease in government purchases 
B) A decline in the nominal money supply 
C) An increase in corporate taxes 
D) An increase in consumer confidence

Question 14

An increase in money supply causes the real interest rate to ________ and the price level to ________ in general equilibrium.

Accepted Answer

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

Question 15

Suppose the intersection of the IS and LM curves is to the left of the FE line.A decrease in the price level would most likely eliminate a disequilibrium among the asset,labor,and goods markets by

Accepted Answer

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

Question 16

You have just read that the Federal Reserve has increased the money supply to avoid a recession.For a given price level,you would expect the LM curve to

Accepted Answer

A) shift up and to the left as the real money supply falls. 
B) shift up and to the left as the real money supply rises. 
C) shift down and to the right as the real money supply falls. 
D) shift down and to the right as the real money supply rises. 
A) shift up and to the left as the real money supply falls. 
B) shift up and to the left as the real money supply rises. 
C) shift down and to the right as the real money supply falls. 
D) shift down and to the right as the real money supply rises.

Question 17

Looking only at the asset market,an increase in output would cause

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) an increase in the real interest rate along the LM curve. 
D) a decrease in the real interest rate along the LM curve. 
A) the LM curve to shift down and to the right. 
B) the LM curve to shift up and to the left. 
C) an increase in the real interest rate along the LM curve. 
D) a decrease in the real interest rate along the LM curve.

Question 18

A temporary decrease in government purchases 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 19

To reach general equilibrium,the price level adjusts to shift the ________ until it intersects with the ________.

Accepted Answer

A) IS curve; FE line and LM curve 
B) FE line; LM and IS curves 
C) LM curve; FE line and IS curve 
D) ND curve; FE line and NS curve 
A) IS curve; FE line and LM curve 
B) FE line; LM and IS curves 
C) LM curve; FE line and IS curve 
D) ND curve; FE line and NS curve

Question 20

Classical economists believe that a market economy will normally

Accepted Answer

A) suffer from extended periods of sustained unemployment. 
B) achieve full-employment output. 
C) degenerate into pure monopolies in most industries. 
D) eliminate the problem of economic scarcity. 
A) suffer from extended periods of sustained unemployment. 
B) achieve full-employment output. 
C) degenerate into pure monopolies in most industries. 
D) eliminate the problem of economic scarcity.

A decrease in wealth would cause the IS curve to

Which of the following would shift the FE line to the right?

A temporary supply shock,such as an increase in oil prices,would

Which of the following would shift the FE line to the right?

Describe the effects,in both the short run and the long run,of an increase in the money supply.Explain what happens to real output and the price level.

An increase in the money supply would cause the IS curve to

Which of the following changes shifts the SRAS curve up?

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

Under an assumption of monetary neutrality,a change in the nominal money supply has

A decrease in money supply causes the real interest rate to and output to in the short run,before prices adjust to restore equilibrium.

Which of the following changes shifts the AD curve up and to the right?

An increase in money supply causes the real interest rate to and the price level to in general equilibrium.

Suppose the intersection of the IS and LM curves is to the left of the FE line.A decrease in the price level would most likely eliminate a disequilibrium among the asset,labor,and goods markets by

You have just read that the Federal Reserve has increased the money supply to avoid a recession.For a given price level,you would expect the LM curve to

Looking only at the asset market,an increase in output would cause

A temporary decrease in government purchases causes the real interest rate to and output to in the short run,before prices adjust to restore equilibrium.

To reach general equilibrium,the price level adjusts to shift the until it intersects with the .

Classical economists believe that a market economy will normally

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

A decrease in wealth would cause the IS curve to

Which of the following would shift the FE line to the right?

A temporary supply shock,such as an increase in oil prices,would

Which of the following would shift the FE line to the right?

Describe the effects,in both the short run and the long run,of an increase in the money supply.Explain what happens to real output and the price level.

An increase in the money supply would cause the IS curve to

Which of the following changes shifts the SRAS curve up?

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

Under an assumption of monetary neutrality,a change in the nominal money supply has

A decrease in money supply causes the real interest rate to ________ and output to ________ in the short run,before prices adjust to restore equilibrium.

Which of the following changes shifts the AD curve up and to the right?

An increase in money supply causes the real interest rate to ________ and the price level to ________ in general equilibrium.

Suppose the intersection of the IS and LM curves is to the left of the FE line.A decrease in the price level would most likely eliminate a disequilibrium among the asset,labor,and goods markets by

You have just read that the Federal Reserve has increased the money supply to avoid a recession.For a given price level,you would expect the LM curve to

Looking only at the asset market,an increase in output would cause

A temporary decrease in government purchases causes the real interest rate to ________ and output to ________ in the short run,before prices adjust to restore equilibrium.

To reach general equilibrium,the price level adjusts to shift the ________ until it intersects with the ________.

Classical economists believe that a market economy will normally

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 money supply causes the real interest rate to and output to in the short run,before prices adjust to restore equilibrium.

An increase in money supply causes the real interest rate to and the price level to in general equilibrium.

A temporary decrease in government purchases causes the real interest rate to and output to in the short run,before prices adjust to restore equilibrium.

To reach general equilibrium,the price level adjusts to shift the until it intersects with the .