Question 1

The baseline autonomous spending is that part of autonomous spending

Accepted Answer

A)  that depends on the level of national income. 
B)  that depends on the level of the real interest rate. 
C)  that depends only on the level of foreign real GDP. 
D)  that is independent of the real interest rate. 
A)  that depends on the level of national income. 
B)  that depends on the level of the real interest rate. 
C)  that depends only on the level of foreign real GDP. 
D)  that is independent of the real interest rate. D

Question 2

In the early 1980s (1982 to 1985) the US economy

Accepted Answer

A)  experienced a shifting of the IS curve to the right because of increased business optimism, tax increases, and decreased government spending. 
B)  experienced a movement down and to the right along the IS curve. 
C)  experienced a shifting of the IS curve to the right because of tax reductions, and increased government spending. 
D)  experienced a shifting of the IS curve to the right due to a decrease in interest rates. 
A)  experienced a shifting of the IS curve to the right because of increased business optimism, tax increases, and decreased government spending. 
B)  experienced a movement down and to the right along the IS curve. 
C)  experienced a shifting of the IS curve to the right because of tax reductions, and increased government spending. 
D)  experienced a shifting of the IS curve to the right due to a decrease in interest rates. C

Question 3

An increase in the tax rate will

Accepted Answer

A)  shift the IS curve to the left. 
B)  shift the IS curve to the right. 
C)  make the IS curve more vertical. 
D)  make the IS curve less vertical. 
A)  shift the IS curve to the left. 
B)  shift the IS curve to the right. 
C)  make the IS curve more vertical. 
D)  make the IS curve less vertical. C

Question 4

The opportunity cost of an investment project is

Accepted Answer

A)  the short-term risky, nominal interest rate. 
B)  the price of the investment project. 
C)  the expected profitability of the investment project. 
D)  the long-term, risky, real interest rate. 
A)  the short-term risky, nominal interest rate. 
B)  the price of the investment project. 
C)  the expected profitability of the investment project. 
D)  the long-term, risky, real interest rate.

Question 5

The riskier that lenders believe a loan to be,

Accepted Answer

A)  the higher will be the risk premium they will charge. 
B)  the higher will be the term premium they will charge. 
C)  the lower will be the risk premium they will charge. 
D)  the more willing they will be to make the loan at the risk-free interest rate. 
A)  the higher will be the risk premium they will charge. 
B)  the higher will be the term premium they will charge. 
C)  the lower will be the risk premium they will charge. 
D)  the more willing they will be to make the loan at the risk-free interest rate.

Question 6

The questions with which Chapter 10 is concerned include each of the following except

Accepted Answer

A)  do the determinants of investment in the sticky-price model differ from those of the flexible-price model? 
B)  what is the "LM" Curve? How do we use is it? 
C)  what is the "IS Curve"? How do we use is it? 
D)  how do we calculate the equilibrium level of real GDP in the sticky-price model when the central . bank's policy is to peg the real interest rate? 
A)  do the determinants of investment in the sticky-price model differ from those of the flexible-price model? 
B)  what is the "LM" Curve? How do we use is it? 
C)  what is the "IS Curve"? How do we use is it? 
D)  how do we calculate the equilibrium level of real GDP in the sticky-price model when the central . bank's policy is to peg the real interest rate?

Question 7

The intercept of the investment function

Accepted Answer

A)  tells us by how much investment spending is discouraged by a one-unit increase in the short-term, risky, nominal interest rate. 
B)  tells us by how much investment spending is discouraged by a one-unit increase in the long-term, risky, real interest rate. 
C)  tells us what the level of investment spending would be if the long-term, risky, real interest rate were 0. 
D)  tells us what the level of investment spending would be if the short-term, risky, nominal interest rate were 0. 
A)  tells us by how much investment spending is discouraged by a one-unit increase in the short-term, risky, nominal interest rate. 
B)  tells us by how much investment spending is discouraged by a one-unit increase in the long-term, risky, real interest rate. 
C)  tells us what the level of investment spending would be if the long-term, risky, real interest rate were 0. 
D)  tells us what the level of investment spending would be if the short-term, risky, nominal interest rate were 0.

Question 8

In the sticky-price model, the interest rate is set

Accepted Answer

A)  directly by businesses or indirectly by the combination of the stock of money and the liquidity preference of households and the central bank. 
B)  directly by the central bank or indirectly by the combination of the stock of money and the liquidity preference of households and businesses. 
C)  directly by households or indirectly by the combination of the stock of money and the liquidity preference of businesses and the central bank. 
D)  directly by Congress or indirectly by the combination of the stock of money and the liquidity preference of households and businesses. 
A)  directly by businesses or indirectly by the combination of the stock of money and the liquidity preference of households and the central bank. 
B)  directly by the central bank or indirectly by the combination of the stock of money and the liquidity preference of households and businesses. 
C)  directly by households or indirectly by the combination of the stock of money and the liquidity preference of businesses and the central bank. 
D)  directly by Congress or indirectly by the combination of the stock of money and the liquidity preference of households and businesses.

Question 9

In general, the higher is the stock market,

Accepted Answer

A)  the lower will be investment spending. 
B)  the higher will be investment spending. 
C)  the higher will be government spending. 
D)  the lower will be government spending. 
A)  the lower will be investment spending. 
B)  the higher will be investment spending. 
C)  the higher will be government spending. 
D)  the lower will be government spending.

Question 10

The slope of the IS curve depends on each of the following except

Accepted Answer

A)  the propensity to import. 
B)  the tax rate. 
C)  the interest rate-sensitivity of investment spending. 
D)  foreign real interest rates. 
A)  the propensity to import. 
B)  the tax rate. 
C)  the interest rate-sensitivity of investment spending. 
D)  foreign real interest rates.

Question 11

The intercept of the IS curve depends on each of the following except

Accepted Answer

A)  the baseline level of investment expenditures. 
B)  the marginal propensity to consume. 
C)  the level of foreign real GDP. 
D)  foreign real interest rates. 
A)  the baseline level of investment expenditures. 
B)  the marginal propensity to consume. 
C)  the level of foreign real GDP. 
D)  foreign real interest rates.

Question 12

The slope of the autonomous spending line is

Accepted Answer

A)  -(Iy + X,,r). 
B)  -(Iy - X,,r). 
C)  -(Ir + X,,r). 
D)  -(Ir - X,,r). 
A)  -(Iy + X,,r). 
B)  -(Iy - X,,r). 
C)  -(Ir + X,,r). 
D)  -(Ir - X,,r).

Question 13

An inverted term structure occurs

Accepted Answer

A)  when the term premium is calculated as one divided by the difference between long-term and short-term interest rates. 
B)  when the term premium is negative. 
C)  when the term premium is positive. 
D)  when the difference between stock returns and short-term interest rates is negative. 
A)  when the term premium is calculated as one divided by the difference between long-term and short-term interest rates. 
B)  when the term premium is negative. 
C)  when the term premium is positive. 
D)  when the difference between stock returns and short-term interest rates is negative.

Question 14

The intercept of the IS curve depends on each of the following except

Accepted Answer

A)  the propensity to import. 
B)  the baseline level of consumption expenditures 
C)  the level of foreign real GDP. 
D)  the level of government purchases. 
A)  the propensity to import. 
B)  the baseline level of consumption expenditures 
C)  the level of foreign real GDP. 
D)  the level of government purchases.

Question 15

An increase in the marginal propensity to consume will

Accepted Answer

A)  shift the IS curve to the left. 
B)  shift the IS curve to the right. 
C)  make the IS curve more vertical. 
D)  make the IS curve less vertical. 
A)  shift the IS curve to the left. 
B)  shift the IS curve to the right. 
C)  make the IS curve more vertical. 
D)  make the IS curve less vertical.

Question 16

The IS curve tells us

Accepted Answer

A)  what equilibrium level of real GDP corresponds to each possible value of the nominal interest rate. 
B)  what equilibrium level of real GDP corresponds to each possible value of the price level. 
C)  what equilibrium level of real GDP corresponds to each possible value of the real interest rate. 
D)  what equilibrium level of real GDP corresponds to each possible value of the money supply. 
A)  what equilibrium level of real GDP corresponds to each possible value of the nominal interest rate. 
B)  what equilibrium level of real GDP corresponds to each possible value of the price level. 
C)  what equilibrium level of real GDP corresponds to each possible value of the real interest rate. 
D)  what equilibrium level of real GDP corresponds to each possible value of the money supply.

Question 17

The intercept of the IS curve tells us

Accepted Answer

A)  the value that real GDP would attain if the real interest rate were at its equilibrium value. 
B)  the value that real GDP would attain if the real interest rate were zero. 
C)  the responsiveness of equilibrium real GDP to changes in the long-term, risky, real interest rate. 
D)  the responsiveness of equilibrium real GDP to changes in the short-term, risky, nominal interest rate. 
A)  the value that real GDP would attain if the real interest rate were at its equilibrium value. 
B)  the value that real GDP would attain if the real interest rate were zero. 
C)  the responsiveness of equilibrium real GDP to changes in the long-term, risky, real interest rate. 
D)  the responsiveness of equilibrium real GDP to changes in the short-term, risky, nominal interest rate.

Question 18

An increase in the propensity to import will

Accepted Answer

A)  shift the IS curve to the left. 
B)  shift the IS curve to the right. 
C)  make the IS curve more vertical. 
D)  make the IS curve less vertical. 
A)  shift the IS curve to the left. 
B)  shift the IS curve to the right. 
C)  make the IS curve more vertical. 
D)  make the IS curve less vertical.

Question 19

If the MPE is equal to .7, the baseline level of spending is $4 trillion, a one percentage point decrease in the real interest rate increases investment spending by $100 billion and exports by $20 billion, and the real interest rate is equal to 5%, then the equilibrium level of real GDP is

Accepted Answer

A)  $11.733 trillion. 
B)  $5.028 trillion. 
C)  $1.056 trillion. 
D)  $14.933 trillion. 
A)  $11.733 trillion. 
B)  $5.028 trillion. 
C)  $1.056 trillion. 
D)  $14.933 trillion.

Question 20

Examination of the yield curve indicates

Accepted Answer

A)  that short-term nominal interest rates are usually higher than long-term nominal interest rates. 
B)  that the expected profitability of short-term investment projects is usually higher than the expected . profitability of long-term investment projects. 
C)  that short-term nominal interest rates are usually lower than long-term nominal interest rates. 
D)  that the expected rate of return on short-term stocks is usually lower than the expected rate of return on long-term stocks. 
A)  that short-term nominal interest rates are usually higher than long-term nominal interest rates. 
B)  that the expected profitability of short-term investment projects is usually higher than the expected . profitability of long-term investment projects. 
C)  that short-term nominal interest rates are usually lower than long-term nominal interest rates. 
D)  that the expected rate of return on short-term stocks is usually lower than the expected rate of return on long-term stocks.

The baseline autonomous spending is that part of autonomous spending

In the early 1980s (1982 to 1985) the US economy

An increase in the tax rate will

The opportunity cost of an investment project is

The riskier that lenders believe a loan to be,

The questions with which Chapter 10 is concerned include each of the following except

The intercept of the investment function

In the sticky-price model, the interest rate is set

In general, the higher is the stock market,

The slope of the IS curve depends on each of the following except

The intercept of the IS curve depends on each of the following except

The slope of the autonomous spending line is

An inverted term structure occurs

The intercept of the IS curve depends on each of the following except

An increase in the marginal propensity to consume will

The IS curve tells us

The intercept of the IS curve tells us

An increase in the propensity to import will

If the MPE is equal to .7, the baseline level of spending is $4 trillion, a one percentage point decrease in the real interest rate increases investment spending by $100 billion and exports by $20 billion, and the real interest rate is equal to 5%, then the equilibrium level of real GDP is

Examination of the yield curve indicates

Introduction to Macroeconomics

Measuring the Macroeconomy

Thinking Like an Economist

The Theory of Economic Growth

The Reality of Economic Growth: History and Prospect

Building Blocks of the Flexible-Price Model

Equilibrium in the Flexible-Price M Odel

Money, Prices, and Inflation

The Sticky-Price Income-Expenditure Framework: Consumption and the Multiplier

The Money Market and the LM Curve

The Phillips Curve, Expectations, and Monetary Policy

Stabilization Policy

Budget Balance, National Debt, and Investment

International Economic Policy

Changes in the Macroeconomy and Changes in Macroeconomic Policy

The Future of Macroeconomics

Epilogue

Filters

Exam 10: Investment, Net Exports, and Interest Rates: The Is Curve

The baseline autonomous spending is that part of autonomous spending

In the early 1980s (1982 to 1985) the US economy

An increase in the tax rate will

The opportunity cost of an investment project is

The riskier that lenders believe a loan to be,

The questions with which Chapter 10 is concerned include each of the following except

The intercept of the investment function

In the sticky-price model, the interest rate is set

In general, the higher is the stock market,

The slope of the IS curve depends on each of the following except

The intercept of the IS curve depends on each of the following except

The slope of the autonomous spending line is

An inverted term structure occurs

The intercept of the IS curve depends on each of the following except

An increase in the marginal propensity to consume will

The IS curve tells us

The intercept of the IS curve tells us

An increase in the propensity to import will

If the MPE is equal to .7, the baseline level of spending is $4 trillion, a one percentage point decrease in the real interest rate increases investment spending by $100 billion and exports by $20 billion, and the real interest rate is equal to 5%, then the equilibrium level of real GDP is

Examination of the yield curve indicates

Introduction to Macroeconomics

Measuring the Macroeconomy

Thinking Like an Economist

The Theory of Economic Growth

The Reality of Economic Growth: History and Prospect

Building Blocks of the Flexible-Price Model

Equilibrium in the Flexible-Price M Odel

Money, Prices, and Inflation

The Sticky-Price Income-Expenditure Framework: Consumption and the Multiplier

The Money Market and the LM Curve

The Phillips Curve, Expectations, and Monetary Policy

Stabilization Policy

Budget Balance, National Debt, and Investment

International Economic Policy

Changes in the Macroeconomy and Changes in Macroeconomic Policy

The Future of Macroeconomics

Epilogue

Filters