Question 1

A key assumption of Ricardian equivalence is:

Accepted Answer

A) the Permanent Income hypothesis. 
B) the Life Cycle hypothesis. 
C) adaptive expectations. 
D) independent monetary policy. 
E) none of the above 
A) the Permanent Income hypothesis. 
B) the Life Cycle hypothesis. 
C) adaptive expectations. 
D) independent monetary policy. 
E) none of the above A

Question 2

-Consider Figure 11.1,which shows the growth rate of real investment and the real GDP.How does the investment function describe why investment is more volatile than the real GDP?

Accepted Answer

A) Firms are unpredictable. 
B) differences in expectations across firms 
C) differences in expenditure shares. 
D) the inclusion of interest rates in the investment function 
E) none of the above 
A) Firms are unpredictable. 
B) differences in expectations across firms 
C) differences in expenditure shares. 
D) the inclusion of interest rates in the investment function 
E) none of the above D

Question 3

According to Ricardian equivalence,an increase in government expenditure without a proportional tax increase implies that households:

Accepted Answer

A) expect future tax increases and will reduce spending today. 
B) expect higher current income and will increase spending today. 
C) expect future tax decreases and will reduce spending today. 
D) expect their income to remain constant and will hold spending constant. 
E) do not change their spending patterns. 
A) expect future tax increases and will reduce spending today. 
B) expect higher current income and will increase spending today. 
C) expect future tax decreases and will reduce spending today. 
D) expect their income to remain constant and will hold spending constant. 
E) do not change their spending patterns. A

Question 4

Explain what happens to the macroeconomy in the short run in each of the following circumstances:
(a)There is deep recession in Europe;
(b)Housing values rise above their trend;
(c)Mortgage lenders raise interest rates;
(d)The government decides to close 20 percent of its military bases around the country;
(e)The long-run interest rate rises.

Accepted Answer

(a)This is an adverse demand shock: @#IMG-DLM& .
(

Question 5

-Consider Figure 11.2.If investment is interest rate insensitive,the economy would be characterized by __________.

Accepted Answer

A)    
B)    
C)    
D)    
E) Not enough information is given. 
A)    
B)    
C)    
D)    
E) Not enough information is given.

Question 6

The IS curve describes short-run movements in an economy via which of the following?

Accepted Answer

A)    
B)    
C)    
D)    
E)    
A)    
B)    
C)    
D)    
E)

Question 7

The foundation of the IS curve is the equation __________,which is the __________.

Accepted Answer

A)    ;national income identity 
B)    ;national income identity 
C)    ;national income identity 
D)    ;current account 
E) a and b are correct. 
A)    ;national income identity 
B)    ;national income identity 
C)    ;national income identity 
D)    ;current account 
E) a and b are correct.

Question 8

Over the past few years,the Chinese have bought billions of dollars of U.S.bonds,pushing down U.S.interest rates.From this,you conclude that:

Accepted Answer

A) short-run output will rise along the IS curve,possibly pushing the economy toward expansion. 
B) short-run output will fall along the IS curve,possibly pushing the economy toward recession. 
C) short-run output will fall as the IS curve shifts left,possibly pushing the economy toward recession. 
D) the federal government will lower taxes. 
E) there will be no change in short-run output. 
A) short-run output will rise along the IS curve,possibly pushing the economy toward expansion. 
B) short-run output will fall along the IS curve,possibly pushing the economy toward recession. 
C) short-run output will fall as the IS curve shifts left,possibly pushing the economy toward recession. 
D) the federal government will lower taxes. 
E) there will be no change in short-run output.

Question 9

When the real interest rate rises,there is leftward movement along the IS curve.

Accepted Answer

A) True 
 B)False

Question 10

The implication of Ricardian equivalence is that,if the government increases expenditures without increasing taxes,the increase in government expenditures will be:

Accepted Answer

A) at least partially offset by a reduction in consumer spending. 
B) enhanced by an increase in consumer spending. 
C) more than offset by a reduction in firm spending. 
D) enhanced by the multiplier effect. 
E) none of the above 
A) at least partially offset by a reduction in consumer spending. 
B) enhanced by an increase in consumer spending. 
C) more than offset by a reduction in firm spending. 
D) enhanced by the multiplier effect. 
E) none of the above

Question 11

In the IS curve,consumption is represented as a constant fraction of __________,and,therefore,is __________ than current output.

Accepted Answer

A) potential output;more volatile 
B) potential output;smoother 
C) short-run fluctuations;smoother 
D) short-run fluctuations;more volatile 
E) none of the above 
A) potential output;more volatile 
B) potential output;smoother 
C) short-run fluctuations;smoother 
D) short-run fluctuations;more volatile 
E) none of the above

Question 12

You hear that the Federal Reserve is raising interest rates.From this new information,you conclude that

Accepted Answer

A) short-run output will fall along the IS curve,possibly pushing the economy toward recession. 
B) short-run output will rise along the IS curve,possibly pushing the economy toward expansion. 
C) short-run output will fall as the IS curve shifts left,possibly pushing the economy toward recession. 
D) the federal government will lower taxes. 
E) there will be no change in short-run output. 
A) short-run output will fall along the IS curve,possibly pushing the economy toward recession. 
B) short-run output will rise along the IS curve,possibly pushing the economy toward expansion. 
C) short-run output will fall as the IS curve shifts left,possibly pushing the economy toward recession. 
D) the federal government will lower taxes. 
E) there will be no change in short-run output.

Question 13

In the IS curve  
,the term  
Is called:

Accepted Answer

A) the tax rate. 
B) the elasticity of output with respect to the interest rate. 
C) a consumption expenditure shock. 
D) the deviation of the real interest rate to the marginal product of capital. 
E) an aggregate demand shock. 
A) the tax rate. 
B) the elasticity of output with respect to the interest rate. 
C) a consumption expenditure shock. 
D) the deviation of the real interest rate to the marginal product of capital. 
E) an aggregate demand shock.

Question 14

Derive Hicks' IS relationship beginning with the national income identity.

Accepted Answer

Begin with Y = C + I + G + EX - IM and d

Question 15

In the IS curve,consumption,government expenditure,exports,and imports are a function of:

Accepted Answer

A) expectations. 
B) current output. 
C) potential output. 
D) the interest rate. 
E) output fluctuations. 
A) expectations. 
B) current output. 
C) potential output. 
D) the interest rate. 
E) output fluctuations.

Question 16

What should the long-run effect of the temporary tax cuts implemented in George H.Bush's presidency be according to Ricardian Equivalence?

Accepted Answer

This is based on the Permanent Income hy

Question 17

In the short run,if the Federal Reserve reduces interest rates,

Accepted Answer

A) firms do not change their capital stock. 
B) firms buy less capital and the marginal product of capital falls. 
C) firms allow their capital to fully depreciate. 
D) firms accumulate more inventory. 
E) firms buy more capital and the marginal product of capital falls. 
A) firms do not change their capital stock. 
B) firms buy less capital and the marginal product of capital falls. 
C) firms allow their capital to fully depreciate. 
D) firms accumulate more inventory. 
E) firms buy more capital and the marginal product of capital falls.

Question 18

Consider the IS curve  
If there is no demand shock and  
And  
,a 1 percent increase in the real interest rate causes shortrun output to:

Accepted Answer

A) fall by 2 percent. 
B) rise by 4 percent. 
C) fall by 4 percent. 
D) fall by 0.5 percent. 
E) Not enough information is given. 
A) fall by 2 percent. 
B) rise by 4 percent. 
C) fall by 4 percent. 
D) fall by 0.5 percent. 
E) Not enough information is given.

Question 19

In the late 1990s,the United States experienced a significant productivity shock that raised the marginal product capital.This would have caused:

Accepted Answer

A) a shift in the aggregate supply curve. 
B) a leftward movement along the IS curve. 
C) a rightward shift of the IS curve. 
D) a rightward movement along the IS curve. 
E) no change in the IS curve. 
A) a shift in the aggregate supply curve. 
B) a leftward movement along the IS curve. 
C) a rightward shift of the IS curve. 
D) a rightward movement along the IS curve. 
E) no change in the IS curve.

Question 20

If the government gives firms a temporary investment tax credit,

Accepted Answer

A) firms will invest now rather than in the future. 
B) it will increase   . 
C) it will increase   . 
D) All of the above are correct. 
E) None of the above is correct. 
A) firms will invest now rather than in the future. 
B) it will increase   . 
C) it will increase   . 
D) All of the above are correct. 
E) None of the above is correct.

A key assumption of Ricardian equivalence is:

-Consider Figure 11.1,which shows the growth rate of real investment and the real GDP.How does the investment function describe why investment is more volatile than the real GDP?

According to Ricardian equivalence,an increase in government expenditure without a proportional tax increase implies that households:

-Consider Figure 11.2.If investment is interest rate insensitive,the economy would be characterized by __________.

The IS curve describes short-run movements in an economy via which of the following?

The foundation of the IS curve is the equation ,which is the .

Over the past few years,the Chinese have bought billions of dollars of U.S.bonds,pushing down U.S.interest rates.From this,you conclude that:

When the real interest rate rises,there is leftward movement along the IS curve.

The implication of Ricardian equivalence is that,if the government increases expenditures without increasing taxes,the increase in government expenditures will be:

In the IS curve,consumption is represented as a constant fraction of ,and,therefore,is than current output.

You hear that the Federal Reserve is raising interest rates.From this new information,you conclude that

In the IS curve ,the term Is called:

Derive Hicks' IS relationship beginning with the national income identity.

In the IS curve,consumption,government expenditure,exports,and imports are a function of:

What should the long-run effect of the temporary tax cuts implemented in George H.Bush's presidency be according to Ricardian Equivalence?

In the short run,if the Federal Reserve reduces interest rates,

Consider the IS curve If there is no demand shock and And ,a 1 percent increase in the real interest rate causes shortrun output to:

In the late 1990s,the United States experienced a significant productivity shock that raised the marginal product capital.This would have caused:

If the government gives firms a temporary investment tax credit,

Introduction to Macroeconomics

Measuring the Macroeconomy

An Overview of Long- Run Economic Growth

A Model of Production

The Solow Growth Model

Growth and Ideas

The Labor Market,wages,and Unemployment

Inflation

An Introduction to the Short Run

The Great Recession: a First Look

Monetary Policy and the Phillips Curve

Stabilization Policy and the Asad Framework

The Great Recession and the Short-Run Model

Consumption

Investment

The Government and the Macroeconomy

International Trade

Exchange Rates and International Finance

Parting Thoughts

Filters

Exam 11: The Is Curve

A key assumption of Ricardian equivalence is:

-Consider Figure 11.1,which shows the growth rate of real investment and the real GDP.How does the investment function describe why investment is more volatile than the real GDP?

According to Ricardian equivalence,an increase in government expenditure without a proportional tax increase implies that households:

-Consider Figure 11.2.If investment is interest rate insensitive,the economy would be characterized by __________.

The IS curve describes short-run movements in an economy via which of the following?

The foundation of the IS curve is the equation __________,which is the __________.

Over the past few years,the Chinese have bought billions of dollars of U.S.bonds,pushing down U.S.interest rates.From this,you conclude that:

When the real interest rate rises,there is leftward movement along the IS curve.

The implication of Ricardian equivalence is that,if the government increases expenditures without increasing taxes,the increase in government expenditures will be:

In the IS curve,consumption is represented as a constant fraction of __________,and,therefore,is __________ than current output.

You hear that the Federal Reserve is raising interest rates.From this new information,you conclude that

In the IS curve ,the term Is called:

Derive Hicks' IS relationship beginning with the national income identity.

In the IS curve,consumption,government expenditure,exports,and imports are a function of:

What should the long-run effect of the temporary tax cuts implemented in George H.Bush's presidency be according to Ricardian Equivalence?

In the short run,if the Federal Reserve reduces interest rates,

Consider the IS curve If there is no demand shock and And ,a 1 percent increase in the real interest rate causes shortrun output to:

In the late 1990s,the United States experienced a significant productivity shock that raised the marginal product capital.This would have caused:

If the government gives firms a temporary investment tax credit,

Introduction to Macroeconomics

Measuring the Macroeconomy

An Overview of Long- Run Economic Growth

A Model of Production

The Solow Growth Model

Growth and Ideas

The Labor Market,wages,and Unemployment

Inflation

An Introduction to the Short Run

The Great Recession: a First Look

Monetary Policy and the Phillips Curve

Stabilization Policy and the Asad Framework

The Great Recession and the Short-Run Model

Consumption

Investment

The Government and the Macroeconomy

International Trade

Exchange Rates and International Finance

Parting Thoughts

Filters

The foundation of the IS curve is the equation ,which is the .

In the IS curve,consumption is represented as a constant fraction of ,and,therefore,is than current output.