Deck 2: Economics Model and IS-LM Analysis

Question 1

When there is an increase in the autonomous money supply, ceteris paribus, LM shifts:

A)leftward
B)rightward
C)no shift
D)none

Answer 1

rightward

Question 2

An Economic model is a statement of relationship among economic ------

A)variables
B)phenomena
C)development
D)none of these

Answer 2

variables

Question 3

LM curve shows the equilibrium condition in ---------- market

A)goods market
B)product market
C)money market
D)none of these

Answer 3

money market

Question 4

The simplest ISLM model consists of:

A)two markets
B)three markets
C)four markets
D)five markets

Question 5

The equilibrium in the product market is represented by which curve?

A)is
B)lm
C)demand
D)supply curve

Question 6

The IS curve has a------slope

A)positive
B)negative
C)zero
D)none of these

Question 7

The LM curve has a------slope

A)positive
B)negative
C)zero
D)none of these

Question 8

ISLM model was developed by:

A)hicks
B)keynes
C)friedman
D)none of these

Question 9

The perfectly elastic segment of the LM curve is:

A)keynesian range
B)classical range
C)intermediate range
D)none of these

Question 10

Which policy is effective in the Classical range?

A)monetary policy
B)fiscal policy
C)incomes policy
D)none of these

Question 11

Which policy is effective in the intermediate range?

A)monetary policy
B)fiscal policy
C)both policies
D)none of these

Question 12

IS-LM model was developed by:

A)keynes
B)walras
C)j.r.hicks
D)don-patinkin

Question 13

Frictional unemployment exists:

A)when there is a decrease in real gdp
B)because it takes time to find a job when one is first entering the labour force
C)as a result of technological change
D)when an individual retires

Question 14

The natural rate of unemployment equals the sum of those who are:

A)frictionally and structurally unemployed
B)frictionallyandcyclicallyunemployed
C)structurallyandcyclicallyunemployed
D)frictionally structurally and cyclically unemployed

Question 15

The marginal productivity of labour is:

A)the incremental output due to an increase in capital, ceteris paribus
B)the incremental output due to an increase in labour, ceteris paribus.
C)the incremental output due to a change in technology, ceteris paribus
D)the incremental output due to a change in technology and a change in the

Question 16

The marginal productivity of labour:

A)increases when the price of the good sold increases, ceteris paribus
B)decreases when there is an adverse supply shock, ceteris paribus
C)increase when more workers are hired, ceteris paribus
D)decreases when there is an increase in the quantity of capital, ceteris paribus

Question 17

When saving is greater than investment in a two-sectormodel,

A)outputshould increase
B)output should decrease
C)output should not change
D)none of these

Question 18

When investment is negatively related to the rate of interest, equilibrium output in the goods market:

A)is unrelated to the rate of interest
B)is inversely related to the rate of interest
C)is positively related to the rate of interest
D)falls as the rate of interest decreases

Question 19

Simultaneous equilibrium in the money (LM) and goods (IS) market exists:

A)at an unlimited number of output levels and rates of interest
B)at only one output level and rate ofinterest
C)at an unlimited number of output levels and only one rate of interest
D)at only one output level and an unlimited number of rates of interest

Question 20

In which of the following situations will an increase in the money supply have no effect upon output?

A)lm is steeply sloped and is is steeply sloped
B)lm is vertical and is is steeply sloped
C)lm is steeply sloped and is is vertical
D)lm is relatively flat as is is

Question 21

Policy Neutrality is the main proposition of:

A)supply side economics.
B)keynesian economics
C)monetarism
D)rational expectations hypothesis

Question 22

Who invented the General Equilibrium analysis?

A)l. walras.
B)w. leontief
C)j.m.keynes.
D)none of these.