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Chapter 11 - Review
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Questions in this quiz (18)
11. The IS–LM model takes ______ as exogenous.
- AA) the price level and national income
- BB) the price level
- CC) national income
- DD) the interest rate
22. (Exhibit: Keynesian Cross) In this graph, the equilibrium levels of income and expenditure are:
- AA) Y1 and PE1.
- BB) Y2 and PE2.
- CC) Y3 and PE3.
- DD) Y3 and PE4.
33. The government-purchases multiplier indicates how much ______ change(s) in response to a $1 change in government purchases.
- AA) the budget deficit
- BB) consumption
- CC) income
- DD) real balances
44. In the Keynesian-cross model, if government purchases increase by 250, then the equilibrium level of income:
- AA) increases by 250.
- BB) increases by more than 250.
- CC) decreases by 250.
- DD) increases, but by less than 250.
55. In the Keynesian-cross model, the equilibrium level of income is determined by:
- AA) the factors of production.
- BB) the money supply.
- CC) planned spending
- DD) liquidity preference.
66. In the Keynesian-cross model, a decrease in the interest rate ______ planned investment spending and ______ the equilibrium level of income.
- AA) increases; increases
- BB) increases; decreases
- CC) decreases; decreases
- DD) decreases; increases
77. According to the theory of liquidity preference, the supply of real money balances:
- AA) decreases as the interest rate increases.
- BB) increases as the interest rate increases.
- CC) increases as income increases.
- DD) is fixed.
88. The theory of liquidity preference implies that:
- AA) as the interest rate rises, the demand for real balances will fall.
- BB) as the interest rate rises, the demand for real balances will rise.
- CC) the interest rate will have no effect on the demand for real balances.
- DD) as the interest rate rises, income will rise.
99. (Exhibit: Market for Real Money Balances) Based on the graph, the equilibrium levels of interest rates and real money balances are:
- AA) r1 and M1/P1
- BB) r2 and M2/P2
- CC) r3 and M2/P2
- DD) r3 and M3/P3
1010. The theory of liquidity preference implies that, other things being equal, an increase in the real money supply will:
- AA) lower the interest rate.
- BB) raise the interest rate.
- CC) have no effect on the interest rate.
- DD) first lower and then raise the interest rate.
1111. According to the theory of liquidity preference, tightening the money supply will ______ nominal interest rates in the short run, and, according to the Fisher effect, tightening the money supply will ______ nominal interest rates in the long run.
- AA) increase; increase
- BB) increase; decrease
- CC) decrease; decrease
- DD) decrease; increase
1212. An explanation for the slope of the LM curve is that as:
- AA) the interest rate increases, income becomes higher.
- BB) the interest rate increases, income becomes lower.
- CC) income rises, money demand rises, and a higher interest rate is required.
- DD) income rises, money demand rises, and a lower interest rate is required.
1313. A decrease in the real money supply, other things being equal, will shift the LM curve:
- AA) downward and to the left.
- BB) upward and to the left.
- CC) downward and to the right.
- DD) upward and to the right.
1414. Changes in monetary policy shift the:
- AA) LM curve.
- BB) planned spending curve.
- CC) money demand curve.
- DD) IS curve.
1515. The LM curve shows combinations of ______ that are consistent with equilibrium in the market for real money balances.
- AA) inflation and unemployment
- BB) the price level and real output
- CC) the interest rate and the level of income
- DD) the interest rate and real money balances
1616. The IS and LM curves together generally determine:
- AA) income only.
- BB) the interest rate only.
- CC) both income and the interest rate.
- DD) income, the interest rate, and the price level.
1717. The IS–LM model is generally used:
- AA) only in the short run.
- BB) only in the long run.
- CC) both in the short run and the long run.
- DD) in determining the price level.
1818. In the Keynesian-cross analysis, if the consumption function is given by C = 100 + 0.6(Y – T), and planned investment is 100, G is 100, and T is 100, then equilibrium Y is:
- AA) 350.
- BB) 400.
- CC) 600.
- DD) 750.
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- Econ Exam 3 Quiz on Chapter 11 - Review, created by Mahmoud Hemood on 27/05/2019.
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- Mahmoud Hemood
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- Created on 27 May 2019 · updated on 27 May 2019
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