Question 1

When drawn on a graph with Y along the horizontal axis and E along the vertical axis,the line showing planned expenditures rises to the:

Accepted Answer

A)  right with a slope less than one. 
B)  right with a slope greater than one. 
C)  left with a slope less than one. 
D)  left with a slope greater than one. 
A)  right with a slope less than one. 
B)  right with a slope greater than one. 
C)  left with a slope less than one. 
D)  left with a slope greater than one.

Question 2

The theory of liquidity preference implies that:

Accepted Answer

A)  as the interest rate rises,the demand for real balances will fall. 
B)  as the interest rate rises,the demand for real balances will rise. 
C)  the interest rate will have no effect on the demand for real balances. 
D)  as the interest rate rises,income will rise. 
A)  as the interest rate rises,the demand for real balances will fall. 
B)  as the interest rate rises,the demand for real balances will rise. 
C)  the interest rate will have no effect on the demand for real balances. 
D)  as the interest rate rises,income will rise.

Question 3

The LM curve generally determines:

Accepted Answer

A)  income. 
B)  the interest rate. 
C)  both income and the interest rate. 
D)  neither income nor the interest rate. 
A)  income. 
B)  the interest rate. 
C)  both income and the interest rate. 
D)  neither income nor the interest rate.

Question 4

The LM curve is steeper the ______ the interest sensitivity of money demand and the ______ the effect of income on money demand.

Accepted Answer

A)  greater; greater 
B)  greater; smaller 
C)  smaller; smaller 
D)  smaller; greater 
A)  greater; greater 
B)  greater; smaller 
C)  smaller; smaller 
D)  smaller; greater

Question 5

The IS-LM model is generally used:

Accepted Answer

A)  only in the short run. 
B)  only in the long run. 
C)  both in the short run and the long run. 
D)  in determining the price level. 
A)  only in the short run. 
B)  only in the long run. 
C)  both in the short run and the long run. 
D)  in determining the price level.

Question 6

For any given interest rate and price level,an increase in the money supply:

Accepted Answer

A)  lowers income. 
B)  raises income. 
C)  has no effect on income. 
D)  lowers velocity. 
A)  lowers income. 
B)  raises income. 
C)  has no effect on income. 
D)  lowers velocity.

Question 7

In the Keynesian-cross model,if government purchases increase by 100,then planned expenditures ______ for any given level of income.

Accepted Answer

A)  increase by 100 
B)  increase by more than 100 
C)  decrease by 100 
D)  increase,but by less than 100 
A)  increase by 100 
B)  increase by more than 100 
C)  decrease by 100 
D)  increase,but by less than 100

Question 8

In the loanable funds model,a decrease in income ______ national saving and ______ the equilibrium interest rate.

Accepted Answer

A)  increases; increases 
B)  increases; decreases 
C)  decreases; decreases 
D)  decreases; increases 
A)  increases; increases 
B)  increases; decreases 
C)  decreases; decreases 
D)  decreases; increases

Question 9

In the Keynesian-cross model,if taxes are reduced by 100,then planned expenditures ______ for any given level of income.

Accepted Answer

A)  increase by 100 
B)  increase by more than 100 
C)  decrease by 100 
D)  increase,but by less than 100 
A)  increase by 100 
B)  increase by more than 100 
C)  decrease by 100 
D)  increase,but by less than 100

Question 10

A decrease in the real money supply,other things being equal,will shift the LM curve:

Accepted Answer

A)  downward and to the left. 
B)  upward and to the left. 
C)  downward and to the right. 
D)  upward and to the right. 
A)  downward and to the left. 
B)  upward and to the left. 
C)  downward and to the right. 
D)  upward and to the right.

Question 11

A decrease in the price level,holding nominal money supply constant,will shift the LM curve:

Accepted Answer

A)  upward and to the right. 
B)  downward and to the right. 
C)  downward and to the left. 
D)  upward and to the left. 
A)  upward and to the right. 
B)  downward and to the right. 
C)  downward and to the left. 
D)  upward and to the left.

Question 12

A rise in government spending shifts the IS curve because it ______ national saving for any given level of income,and this ______ the interest rate for any given level of income.

Accepted Answer

A)  reduces; reduction lowers 
B)  reduces; reduction raises 
C)  increases; increase raises 
D)  increases; increase lowers 
A)  reduces; reduction lowers 
B)  reduces; reduction raises 
C)  increases; increase raises 
D)  increases; increase lowers

Question 13

Changes in fiscal policy shift the:

Accepted Answer

A)  LM curve. 
B)  money demand curve. 
C)  money supply curve. 
D)  IS curve. 
A)  LM curve. 
B)  money demand curve. 
C)  money supply curve. 
D)  IS curve.

Question 14

According to classical theory,national income depends on ______,while Keynes proposed that ______ determined the level of national income.

Accepted Answer

A)  aggregate demand; aggregate supply 
B)  aggregate supply; aggregate demand 
C)  monetary policy; fiscal policy 
D)  fiscal policy; monetary policy 
A)  aggregate demand; aggregate supply 
B)  aggregate supply; aggregate demand 
C)  monetary policy; fiscal policy 
D)  fiscal policy; monetary policy

Question 15

If the demand function for money is M/P = 0.5Y - 100r and if M/P increases by 100,then the LM curve for any given interest rate shifts to the:

Accepted Answer

A)  left by 100. 
B)  left by 200. 
C)  right by 100. 
D)  right by 200. 
A)  left by 100. 
B)  left by 200. 
C)  right by 100. 
D)  right by 200.

Question 16

In the Keynesian-cross model,the equilibrium level of income is determined by:

Accepted Answer

A)  the factors of production. 
B)  the money supply. 
C)  planned spending. 
D)  liquidity preference. 
A)  the factors of production. 
B)  the money supply. 
C)  planned spending. 
D)  liquidity preference.

Question 17

The assumption of constant velocity is equivalent to assuming that the demand for real money balances depends on:

Accepted Answer

A)  income alone. 
B)  the interest rate alone. 
C)  income and interest rates. 
D)  people economizing on real balances as the interest rate rises. 
A)  income alone. 
B)  the interest rate alone. 
C)  income and interest rates. 
D)  people economizing on real balances as the interest rate rises.

Question 18

Use the following to answer questions :
Exhibit: Keynesian Cross and Loanable Funds
  
-(Exhibit: Keynesian Cross and Loanable Funds)Both graphs illustrate the inverse relationship between the equilibrium interest rate and the equilibrium level of income.Planned expenditures increase in the Keynesian-cross model as a result of ______,and saving increases in the loanable funds model as a result of ______.

Accepted Answer

A)  an increase in taxes; an increase in real money balances 
B)  a decrease in the interest rate; an increase in income 
C)  a decrease in velocity; an increase in government spending 
D)  an increase in the interest rate; a decrease in income 
A)  an increase in taxes; an increase in real money balances 
B)  a decrease in the interest rate; an increase in income 
C)  a decrease in velocity; an increase in government spending 
D)  an increase in the interest rate; a decrease in income

Question 19

According to the Keynesian-cross analysis,when there is a shift upward in the government-purchases schedule by an amount $\Delta$G and the planned expenditure schedule by an equal amount,then equilibrium income rises by:

Accepted Answer

A)  one unit. 
B)  $\Delta$G. 
C)  $\Delta$G divided by the quantity one minus the marginal propensity to consume. 
D)  $\Delta$G multiplied by the quantity one plus the marginal propensity to consume. 
A)  one unit. 
B)  $\Delta$G. 
C)  $\Delta$G divided by the quantity one minus the marginal propensity to consume. 
D)  $\Delta$G multiplied by the quantity one plus the marginal propensity to consume.

Question 20

According to the theory of liquidity preference,the supply of real money balances:

Accepted Answer

A)  decreases as the interest rate increases. 
B)  increases as the interest rate increases. 
C)  increases as income increases. 
D)  is fixed. 
A)  decreases as the interest rate increases. 
B)  increases as the interest rate increases. 
C)  increases as income increases. 
D)  is fixed.

When drawn on a graph with Y along the horizontal axis and E along the vertical axis,the line showing planned expenditures rises to the:

The theory of liquidity preference implies that:

The LM curve generally determines:

The LM curve is steeper the the interest sensitivity of money demand and the the effect of income on money demand.

The IS-LM model is generally used:

For any given interest rate and price level,an increase in the money supply:

In the Keynesian-cross model,if government purchases increase by 100,then planned expenditures ______ for any given level of income.

In the loanable funds model,a decrease in income national saving and the equilibrium interest rate.

In the Keynesian-cross model,if taxes are reduced by 100,then planned expenditures ______ for any given level of income.

A decrease in the real money supply,other things being equal,will shift the LM curve:

A decrease in the price level,holding nominal money supply constant,will shift the LM curve:

A rise in government spending shifts the IS curve because it national saving for any given level of income,and this the interest rate for any given level of income.

Changes in fiscal policy shift the:

According to classical theory,national income depends on ,while Keynes proposed that determined the level of national income.

If the demand function for money is M/P = 0.5Y - 100r and if M/P increases by 100,then the LM curve for any given interest rate shifts to the:

In the Keynesian-cross model,the equilibrium level of income is determined by:

The assumption of constant velocity is equivalent to assuming that the demand for real money balances depends on:

According to the Keynesian-cross analysis,when there is a shift upward in the government-purchases schedule by an amount $\Delta$ G and the planned expenditure schedule by an equal amount,then equilibrium income rises by:

According to the theory of liquidity preference,the supply of real money balances:

The Science of Macroeconomics

The Data of Macroeconomics

The Open Economy

Unemployment

Economic Growth I

Economic Growth II

Introduction to Economic Fluctuations

Aggregate Supply and the Short-Run

Stabilization Policy

Government Debt and Budget Deficits

Investment

Money Supply and Money Demand

The Financial System

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Exam 10: Aggregate Demand I

When drawn on a graph with Y along the horizontal axis and E along the vertical axis,the line showing planned expenditures rises to the:

The theory of liquidity preference implies that:

The LM curve generally determines:

The LM curve is steeper the ______ the interest sensitivity of money demand and the ______ the effect of income on money demand.

The IS-LM model is generally used:

For any given interest rate and price level,an increase in the money supply:

In the Keynesian-cross model,if government purchases increase by 100,then planned expenditures ______ for any given level of income.

In the loanable funds model,a decrease in income ______ national saving and ______ the equilibrium interest rate.

In the Keynesian-cross model,if taxes are reduced by 100,then planned expenditures ______ for any given level of income.

A decrease in the real money supply,other things being equal,will shift the LM curve:

A decrease in the price level,holding nominal money supply constant,will shift the LM curve:

A rise in government spending shifts the IS curve because it ______ national saving for any given level of income,and this ______ the interest rate for any given level of income.

Changes in fiscal policy shift the:

According to classical theory,national income depends on ______,while Keynes proposed that ______ determined the level of national income.

If the demand function for money is M/P = 0.5Y - 100r and if M/P increases by 100,then the LM curve for any given interest rate shifts to the:

In the Keynesian-cross model,the equilibrium level of income is determined by:

The assumption of constant velocity is equivalent to assuming that the demand for real money balances depends on:

According to the Keynesian-cross analysis,when there is a shift upward in the government-purchases schedule by an amount Δ\DeltaΔ G and the planned expenditure schedule by an equal amount,then equilibrium income rises by:

According to the theory of liquidity preference,the supply of real money balances:

The Science of Macroeconomics

The Data of Macroeconomics

The Open Economy

Unemployment

Economic Growth I

Economic Growth II

Introduction to Economic Fluctuations

Aggregate Supply and the Short-Run

Stabilization Policy

Government Debt and Budget Deficits

Investment

Money Supply and Money Demand

The Financial System

Filters

The LM curve is steeper the the interest sensitivity of money demand and the the effect of income on money demand.

In the loanable funds model,a decrease in income national saving and the equilibrium interest rate.

A rise in government spending shifts the IS curve because it national saving for any given level of income,and this the interest rate for any given level of income.

According to classical theory,national income depends on ,while Keynes proposed that determined the level of national income.

According to the Keynesian-cross analysis,when there is a shift upward in the government-purchases schedule by an amount $\Delta$ G and the planned expenditure schedule by an equal amount,then equilibrium income rises by: