Question 1

An increase in taxes (when Ricardian equivalence doesn't hold)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 2

Classical economists think general equilibrium is attained relatively quickly because

Accepted Answer

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

Question 3

The FE line is vertical because the level of output at full employment doesn't depend on the

Accepted Answer

A) real wage rate. 
B) level of employment. 
C) marginal product of labor. 
D) real interest rate. 
A) real wage rate. 
B) level of employment. 
C) marginal product of labor. 
D) real interest rate.

Question 4

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 5

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 declines.
(b)Money supply declines.
(c)The future marginal productivity of capital declines.
(d)Expected inflation rises.
(e)Future income rises.

Accepted Answer

(a)The IS curve shifts down and to the l

Question 6

Any change that reduces desired saving relative to desired investment (for a given level of output)causes the real interest rate to ________ and shifts the IS curve ________.

Accepted Answer

A) increase; down and to the left 
B) increase; up and to the right 
C) decrease; down and to the left 
D) decrease; up and to the right 
A) increase; down and to the left 
B) increase; up and to the right 
C) decrease; down and to the left 
D) decrease; up and to the right

Question 7

For each outcome below,tell what type of shift must have taken place in either the aggregate demand curve or the long-run aggregate supply curve.
(a)In the short run,the price level is unchanged and output rises.
(b)In the long run,the price level declines and output is unchanged.
(c)In the long run,the price level rises and output declines.

Accepted Answer

(a)The aggregate demand curve

Question 8

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 9

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 10

The aggregate supply curve shows the relation between

Accepted Answer

A) the real interest rate and the aggregate amount of output that firms supply. 
B) the price level and the aggregate amount of output that firms supply. 
C) the supply of goods by firms and the price of goods relative to the price of nonmonetary assets. 
D) the inflation rate and the unemployment rate. 
A) the real interest rate and the aggregate amount of output that firms supply. 
B) the price level and the aggregate amount of output that firms supply. 
C) the supply of goods by firms and the price of goods relative to the price of nonmonetary assets. 
D) the inflation rate and the unemployment rate.

Question 11

Suppose the intersection of the IS and LM curves is to the right of the FE line.What would most likely eliminate a disequilibrium among the asset,labor,and goods markets?

Accepted Answer

A) A rise in the price level,shifting the LM curve up and to the left. 
B) A fall in the price level,shifting the LM curve down and to the right. 
C) A rise in the price level,shifting the IS curve up and to the right. 
D) A fall in the price level,shifting the IS curve down and to the left. 
A) A rise in the price level,shifting the LM curve up and to the left. 
B) A fall in the price level,shifting the LM curve down and to the right. 
C) A rise in the price level,shifting the IS curve up and to the right. 
D) A fall in the price level,shifting the IS curve down and to the left.

Question 12

A beneficial supply shock would cause the FE line to

Accepted Answer

A) shift to the right. 
B) shift to the left. 
C) remain unchanged. 
D) remain unchanged if the shock is temporary; shift to the right if the shock is permanent. 
A) shift to the right. 
B) shift to the left. 
C) remain unchanged. 
D) remain unchanged if the shock is temporary; shift to the right if the shock is permanent.

Question 13

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 14

Identify changes in three variables that would cause the FE line to shift to the right.

Accepted Answer

An increase in productivity,an increase

Question 15

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

Accepted Answer

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

Question 16

Classical economists believe that in the short run,

Accepted Answer

A) money neutrality exists and prices adjust rapidly. 
B) money neutrality does not exist and prices adjust rapidly. 
C) money neutrality exists and prices do not adjust rapidly. 
D) money neutrality does not exist and prices do not adjust rapidly. 
A) money neutrality exists and prices adjust rapidly. 
B) money neutrality does not exist and prices adjust rapidly. 
C) money neutrality exists and prices do not adjust rapidly. 
D) money neutrality does not exist and prices do not adjust rapidly.

Question 17

Draw a saving-investment diagram to show how each of the following changes shifts the IS curve.
(a)Future income rises.
(b)The future marginal productivity of capital increases.
(c)Government purchases decrease temporarily.
(d)The effective corporate tax rate increases.

Accepted Answer

(a)IS shifts up and to the rig

Question 18

When the money supply rises by 10%,in the short run,output ________ and the price level ________.

Accepted Answer

A) rises; is unchanged 
B) declines; falls 
C) is unchanged; falls 
D) declines; is unchanged 
A) rises; is unchanged 
B) declines; falls 
C) is unchanged; falls 
D) declines; is unchanged

Question 19

Desired consumption is Cd = 100 + 0.8Y - 500r - 0.5G,and desired investment is Id = 100 - 500r.Real money demand is Md/P = Y - 2000i.Other variables are ?e = 0.05,G = 200,   = 1000,and M = 2100.
(a)Find the equilibrium values of the real interest rate,consumption,investment,and the price level.
(b)Suppose the money supply increases to 2800.Find the equilibrium values of the real interest rate,consumption,investment,and the price level.(Assume that the expected inflation rate is unchanged.)

Accepted Answer

(a)Use the equation Y = Cd + Id + G = 30

Question 20

Describe the differences between classical and Keynesian economists in terms of their views about monetary neutrality.

Accepted Answer

Keynesians believe that moneta

An increase in taxes (when Ricardian equivalence doesn't hold)causes the real interest rate to and the price level to in general equilibrium.

Classical economists think general equilibrium is attained relatively quickly because

The FE line is vertical because the level of output at full employment doesn't depend on the

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

Any change that reduces desired saving relative to desired investment (for a given level of output)causes the real interest rate to and shifts the IS curve .

A temporary adverse supply shock directly causes

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?

The aggregate supply curve shows the relation between

Suppose the intersection of the IS and LM curves is to the right of the FE line.What would most likely eliminate a disequilibrium among the asset,labor,and goods markets?

A beneficial supply shock would cause the FE line to

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

Identify changes in three variables that would cause the FE line to shift to the right.

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

Classical economists believe that in the short run,

Draw a saving-investment diagram to show how each of the following changes shifts the IS curve. (a)Future income rises. (b)The future marginal productivity of capital increases. (c)Government purchases decrease temporarily. (d)The effective corporate tax rate increases.

When the money supply rises by 10%,in the short run,output and the price level .

Describe the differences between classical and Keynesian economists in terms of their views about monetary neutrality.

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-LM/AD-AS Model

An increase in taxes (when Ricardian equivalence doesn't hold)causes the real interest rate to ________ and the price level to ________ in general equilibrium.

Classical economists think general equilibrium is attained relatively quickly because

The FE line is vertical because the level of output at full employment doesn't depend on the

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

Any change that reduces desired saving relative to desired investment (for a given level of output)causes the real interest rate to ________ and shifts the IS curve ________.

A temporary adverse supply shock directly causes

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?

The aggregate supply curve shows the relation between

Suppose the intersection of the IS and LM curves is to the right of the FE line.What would most likely eliminate a disequilibrium among the asset,labor,and goods markets?

A beneficial supply shock would cause the FE line to

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

Identify changes in three variables that would cause the FE line to shift to the right.

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

Classical economists believe that in the short run,

Draw a saving-investment diagram to show how each of the following changes shifts the IS curve. (a)Future income rises. (b)The future marginal productivity of capital increases. (c)Government purchases decrease temporarily. (d)The effective corporate tax rate increases.

When the money supply rises by 10%,in the short run,output ________ and the price level ________.

Describe the differences between classical and Keynesian economists in terms of their views about monetary neutrality.

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 taxes (when Ricardian equivalence doesn't hold)causes the real interest rate to and the price level to in general equilibrium.

Any change that reduces desired saving relative to desired investment (for a given level of output)causes the real interest rate to and shifts the IS curve .

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

When the money supply rises by 10%,in the short run,output and the price level .