Exam 11: The Is Curve

Refer to the following figure when answering the following questions. Figure 11.3: IS Curve -Consider Figure 11.3. If investment is interest rate insensitive, the economy would be characterized by:

U.S. government spending on goods and services:

Suppose we assume that initially if rises 2 percent and the real interest rate rises 2 percent, short-run output rises 2 percent.

One hypothesis for the lack of success of the rapid fiscal expansion in Japan financed by increased borrowing in the 1990s to prevent a sharp economic downturn is:

Refer to the following figure when answering the following questions. Figure 11.5: IS Curve -Consider Figure 11.5. If the economy initially is at its long-run equilibrium and the real interest rate increases, the economy moves from point ________ to point ________.

Using the IS curve , in the long run, ________ and ________, so that the economy is ________.

The CBO estimates for declines in the unemployment rate in response to the American Recovery and Reinvestment Act were too low when compared to the actual unemployment rate.

The fundamental lesson of the life-cycle and permanent-income hypotheses is that individuals smooth their consumption patterns over their lifetimes.

During the 2000s, Americans dramatically increased their personal debt. This is an example of a:

Refer to the following figure when answering the following questions. Figure 11.6: IS Curve -Consider the IS curve in Figure 11.6. If the interest rate decreases and there is a negative aggregate demand shock, the economy will move to point:

According to the permanent-income and life-cycle hypotheses, if we wish to smooth consumption over our lifetimes we can:

In the short run, because financial markets do not respond immediately to interest rate changes:

Explain how the permanent-income hypothesis (PIH) can be used to explain "multiplier effects" in an economy.

Suppose we assume that initially if Rises 2 percent and the real interest rate rises 2 percent, short-run output:

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

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

In the simple IS curve analysis, which of the following includes both the real interest rate and the potential output?

If there is an aggregate demand shock, the IS curve shifts right.

Which of the following is NOT an example of an IS shock? i. A change in interest rates ii. A change in tax policy iii. A natural disaster iv. A change in the price of oil

According to the CBO letter to Congress of the impact of the American Recovery and Reinvestment Act on unemployment, the actual unemployment rate as of 2016: