Question 1

A decrease in autonomous consumption ________.

Accepted Answer

A)  raises planned expenditures 
B)  lowers equilibrium output for any level of the interest rate 
C)  shifts the IS curve to the right 
D)  all of the above 
E)  none of the above 
A)  raises planned expenditures 
B)  lowers equilibrium output for any level of the interest rate 
C)  shifts the IS curve to the right 
D)  all of the above 
E)  none of the above B

Question 2

In a stock market boom ________.

Accepted Answer

A)  autonomous consumption might increase because stock holders might feel richer and consume more 
B)  autonomous investment might increase because a higher stock value for a firm helps firms raise funds for increased investment 
C)  the IS curve might shift to the right 
D)  all of the above 
E)  none of the above 
A)  autonomous consumption might increase because stock holders might feel richer and consume more 
B)  autonomous investment might increase because a higher stock value for a firm helps firms raise funds for increased investment 
C)  the IS curve might shift to the right 
D)  all of the above 
E)  none of the above D

Question 3

IS Graph 1  
-On the graph above, unplanned inventory investment is negative at point ________.

Accepted Answer

A)  A 
B)  B 
C)  G 
D)  H 
E)  none of the above 
A)  A 
B)  B 
C)  G 
D)  H 
E)  none of the above D

Question 4

If the government cuts taxes ________.

Accepted Answer

A)  disposable income falls 
B)  planned expenditures rise 
C)  the IS curve shifts to the left 
D)  all of the above 
E)  none of the above 
A)  disposable income falls 
B)  planned expenditures rise 
C)  the IS curve shifts to the left 
D)  all of the above 
E)  none of the above

Question 5

The reason for the downward-sloping IS curve is that ________.

Accepted Answer

A)  lower interest rates lead to higher saving and higher output 
B)  higher interest rates lead to higher saving and lower output 
C)  higher interest rates lead to lower saving and higher output 
D)  all of the above 
E)  none of the above 
A)  lower interest rates lead to higher saving and higher output 
B)  higher interest rates lead to higher saving and lower output 
C)  higher interest rates lead to lower saving and higher output 
D)  all of the above 
E)  none of the above

Question 6

In the IS curve, if Y falls for any given level of the real interest rate ________.

Accepted Answer

A)  consumption increases 
B)  output increases 
C)  saving increases 
D)  all of the above 
E)  none of the above 
A)  consumption increases 
B)  output increases 
C)  saving increases 
D)  all of the above 
E)  none of the above

Question 7

An increase in autonomous consumption ________.

Accepted Answer

A)  lowers planned expenditures 
B)  raises equilibrium output for any level of the interest rate 
C)  causes a movement down along the IS curve 
D)  all of the above 
E)  none of the above 
A)  lowers planned expenditures 
B)  raises equilibrium output for any level of the interest rate 
C)  causes a movement down along the IS curve 
D)  all of the above 
E)  none of the above

Question 8

Planned expenditures ________.

Accepted Answer

A)  are directly affected by government purchases 
B)  increase when there is a reduction in taxes 
C)  decrease when disposable income decreases 
D)  all of the above 
E)  none of the above 
A)  are directly affected by government purchases 
B)  increase when there is a reduction in taxes 
C)  decrease when disposable income decreases 
D)  all of the above 
E)  none of the above

Question 9

In the IS curve ________.

Accepted Answer

A)  an increase in the interest rate constitutes an upward movement along the curve 
B)  an increase in aggregate consumption constitutes a downward movement along the curve 
C)  an increase in taxes constitutes a rightward shift of the curve 
D)  all of the above 
E)  none of the above 
A)  an increase in the interest rate constitutes an upward movement along the curve 
B)  an increase in aggregate consumption constitutes a downward movement along the curve 
C)  an increase in taxes constitutes a rightward shift of the curve 
D)  all of the above 
E)  none of the above

Question 10

Table 1
  
-Given the values in the table above, if the real interest rate rises from 5 to 6, the change in household saving is ________.

Accepted Answer

A)  negative 0.5 
B)  negative 1.55 
C)  negative 0.45 
D)  1.55 
E)  none of the above 
A)  negative 0.5 
B)  negative 1.55 
C)  negative 0.45 
D)  1.55 
E)  none of the above

Question 11

Total planned expenditure (equals total output) is 14,000 when autonomous consumption expenditure is 450. When autonomous consumption expenditure falls to 400, total planned expenditure (equals total output) is 13,800. The marginal propensity to consume is ________.

Accepted Answer

A)  0.89 
B)  0.75 
C)  0.99 
D)  0.44 
E)  0.03 
A)  0.89 
B)  0.75 
C)  0.99 
D)  0.44 
E)  0.03

Question 12

The IS curve shifts to the right when ________.

Accepted Answer

A)  autonomous consumption decreases 
B)  taxes increase 
C)  autonomous investment increases 
D)  all of the above 
E)  none of the above 
A)  autonomous consumption decreases 
B)  taxes increase 
C)  autonomous investment increases 
D)  all of the above 
E)  none of the above

Question 13

In the IS model, assuming that the real interest rate does not change, an increase in autonomous net exports causes total investment, planned plus unplanned, to ________.

Accepted Answer

A)  fall, then rise back to its initial level 
B)  fall, then rise above its initial level 
C)  rise, then fall back to its initial level 
D)  all of the above 
E)  none of the above 
A)  fall, then rise back to its initial level 
B)  fall, then rise above its initial level 
C)  rise, then fall back to its initial level 
D)  all of the above 
E)  none of the above

Question 14

The 2009 fiscal stimulus package was passed ________.

Accepted Answer

A)  to prevent the real interest rate from rising 
B)  to shift the IS curve to the left 
C)  to raise aggregate output at any interest rate 
D)  all of the above 
E)  none of the above 
A)  to prevent the real interest rate from rising 
B)  to shift the IS curve to the left 
C)  to raise aggregate output at any interest rate 
D)  all of the above 
E)  none of the above

Question 15

When the U.S. real interest rate rises ________.

Accepted Answer

A)  U.S. dollar assets earn a lower return relative to foreign assets 
B)  makes U.S. exports more expensive in foreign currencies 
C)  imports will decrease 
D)  all of the above 
E)  none of the above 
A)  U.S. dollar assets earn a lower return relative to foreign assets 
B)  makes U.S. exports more expensive in foreign currencies 
C)  imports will decrease 
D)  all of the above 
E)  none of the above

Question 16

In the IS model, assuming that the real interest rate does not change, an increase in ________ leads to an increase in equilibrium saving by households.

Accepted Answer

A)  autonomous consumption 
B)  taxes 
C)  the price level 
D)  all of the above 
E)  none of the above 
A)  autonomous consumption 
B)  taxes 
C)  the price level 
D)  all of the above 
E)  none of the above

Question 17

The reason for the downward-sloping IS curve is that ________.

Accepted Answer

A)  lower interest rates lead to lower saving and lower output 
B)  lower interest rates lead to lower saving and higher output 
C)  higher interest rates lead to lower saving and higher output 
D)  all of the above 
E)  none of the above 
A)  lower interest rates lead to lower saving and lower output 
B)  lower interest rates lead to lower saving and higher output 
C)  higher interest rates lead to lower saving and higher output 
D)  all of the above 
E)  none of the above

Question 18

If planned expenditure is below output, as the economy approaches equilibrium, ________.

Accepted Answer

A)  planned expenditure is falling 
B)  output is rising 
C)  saving is rising 
D)  all of the above 
E)  none of the above 
A)  planned expenditure is falling 
B)  output is rising 
C)  saving is rising 
D)  all of the above 
E)  none of the above

Question 19

When the U.S. real interest rate rises ________.

Accepted Answer

A)  U.S. dollar assets earn a higher return relative to foreign assets 
B)  makes U.S. exports cheaper in foreign currencies 
C)  imports will decrease 
D)  all of the above 
E)  none of the above 
A)  U.S. dollar assets earn a higher return relative to foreign assets 
B)  makes U.S. exports cheaper in foreign currencies 
C)  imports will decrease 
D)  all of the above 
E)  none of the above

Question 20

Planned investment spending ________.

Accepted Answer

A)  is equal to planned fixed investment spending plus government investment 
B)  is unrelated to the real interest rate 
C)  is heavily influenced by expectations about the future 
D)  all of the above 
E)  none of the above 
A)  is equal to planned fixed investment spending plus government investment 
B)  is unrelated to the real interest rate 
C)  is heavily influenced by expectations about the future 
D)  all of the above 
E)  none of the above

Exam 9: The Is Curve

A decrease in autonomous consumption ________.

In a stock market boom ________.

IS Graph 1 -On the graph above, unplanned inventory investment is negative at point ________.

If the government cuts taxes ________.

The reason for the downward-sloping IS curve is that ________.

In the IS curve, if Y falls for any given level of the real interest rate ________.

An increase in autonomous consumption ________.

Planned expenditures ________.

In the IS curve ________.

Table 1 -Given the values in the table above, if the real interest rate rises from 5 to 6, the change in household saving is ________.

Total planned expenditure (equals total output) is 14,000 when autonomous consumption expenditure is 450. When autonomous consumption expenditure falls to 400, total planned expenditure (equals total output) is 13,800. The marginal propensity to consume is ________.

The IS curve shifts to the right when ________.

In the IS model, assuming that the real interest rate does not change, an increase in autonomous net exports causes total investment, planned plus unplanned, to ________.

The 2009 fiscal stimulus package was passed ________.

When the U.S. real interest rate rises ________.

In the IS model, assuming that the real interest rate does not change, an increase in ________ leads to an increase in equilibrium saving by households.

The reason for the downward-sloping IS curve is that ________.

If planned expenditure is below output, as the economy approaches equilibrium, ________.

When the U.S. real interest rate rises ________.

Planned investment spending ________.

The Policy and Practice of Macroeconomics

Measuring Macroeconomic Data

Aggregate Production and Productivity

Saving and Investment in Closed and Open Economies

Money and Inflation

The Sources of Growth and the Solow Model

Drivers of Growth: Technology, Policy, and Institutions

Business Cycles: an Introduction

Monetary Policy and Aggregate Demand

Aggregate Supply and the Phillips Curve

The Aggregate Demand and Supply Model

Macroeconomic Policy and Aggregate Demand and Supply Analysis

The Financial System and Economic Growth

Financial Crises and the Economy

Fiscal Policy and the Government Budget

Exchange Rates and International Economic Policy

Consumption and Saving

Investment

The Labor Market, Employment, and Unemployment

The Role of Expectations in Macroeconomic Policy

Modern Business Cycle Theory

Filters