Question 1

Factors that influenced planned investment spending include:

Accepted Answer

A) real interest rates. 
B) financial frictions. 
C) emotional waves of optimism and pessimism. 
D) all of the above. 
E) A and C. 
A) real interest rates. 
B) financial frictions. 
C) emotional waves of optimism and pessimism. 
D) all of the above. 
E) A and C.

Question 2

If aggregate demand equals output,

Accepted Answer

A) the economy is in a recession. 
B) output will increase. 
C) output will fall. 
D) the economy is at its equilibrium level. 
A) the economy is in a recession. 
B) output will increase. 
C) output will fall. 
D) the economy is at its equilibrium level.

Question 3

If the consumption function is C = 20 + 0.8YD,then an increase in disposable income by $100 will result in an increase in consumer expenditure by

Accepted Answer

A) $58. 
B) $64. 
C) $80. 
D) $100. 
A) $58. 
B) $64. 
C) $80. 
D) $100.

Question 4

In the Keynesian framework,as long as output is ________ the equilibrium level,unplanned inventory investment will remain ________ and firms will continue to lower production.

Accepted Answer

A) below; negative 
B) above; negative 
C) below; positive 
D) above; positive 
A) below; negative 
B) above; negative 
C) below; positive 
D) above; positive

Question 5

In the Keynesian cross diagram,an increase in autonomous consumer expenditure causes the aggregate demand function to shift up,the equilibrium level of aggregate output to ________,and the IS curve to shift to the ________,everything else held constant.

Accepted Answer

A) rise; left 
B) rise; right 
C) fall; left 
D) fall; right 
A) rise; left 
B) rise; right 
C) fall; left 
D) fall; right

Question 6

In the Keynesian framework,as long as output is ________ the equilibrium level,unplanned inventory investment will remain negative and firms will continue to ________ production.

Accepted Answer

A) below; lower 
B) above; lower 
C) below; raise 
D) above; raise 
A) below; lower 
B) above; lower 
C) below; raise 
D) above; raise

Question 7

If American college students decide that drinking Mexican-brewed beer helps one get noticed,net exports will tend to fall,causing aggregate demand to ________ and the ________ curve to shift to the left,everything else held constant.

Accepted Answer

A) fall; LM 
B) fall; IS 
C) rise; LM 
D) rise; IS 
A) fall; LM 
B) fall; IS 
C) rise; LM 
D) rise; IS

Question 8

The negative relation between investment spending and the interest rate is what gives the ________ curve its ________ slope.

Accepted Answer

A) IS; upward 
B) IS; downward 
C) LM; downward 
D) LM; upward 
A) IS; upward 
B) IS; downward 
C) LM; downward 
D) LM; upward

Question 9

A decrease in interest rates

Accepted Answer

A) increases the value of the dollar,net exports,and equilibrium output. 
B) increases the value of the dollar,reducing net exports and equilibrium output. 
C) reduces the value of the dollar,net exports,and equilibrium output. 
D) reduces the value of the dollar,increasing net exports and equilibrium output. 
A) increases the value of the dollar,net exports,and equilibrium output. 
B) increases the value of the dollar,reducing net exports and equilibrium output. 
C) reduces the value of the dollar,net exports,and equilibrium output. 
D) reduces the value of the dollar,increasing net exports and equilibrium output.

Question 10

Everything else held constant,a shift in tastes in the U.S.towards American goods will ________ net exports in the U.S.and cause the quantity of aggregate output demanded to ________ in Mexico.

Accepted Answer

A) decrease; rise 
B) decrease; fall 
C) increase; rise 
D) increase; fall 
A) decrease; rise 
B) decrease; fall 
C) increase; rise 
D) increase; fall

Question 11

In the Keynesian framework,as long as output is below the equilibrium level,unplanned inventory investment will remain ________ and firms will continue to ________ production.

Accepted Answer

A) negative; lower 
B) negative; raise 
C) positive; lower 
D) positive; raise 
A) negative; lower 
B) negative; raise 
C) positive; lower 
D) positive; raise

Question 12

His analysis started with the recognition that the total quantity demanded of an economy's output was the sum of four types of spending: consumer expenditure,planned investment spending,government spending,and net exports.

Accepted Answer

A) John Maynard Keynes 
B) Sir John Hicks 
C) Milton Friedman 
D) Paul A.Samuelson 
A) John Maynard Keynes 
B) Sir John Hicks 
C) Milton Friedman 
D) Paul A.Samuelson

Question 13

Planned investment spending,a component of aggregate demand,is equal to

Accepted Answer

A) fixed investment plus actual inventory investment. 
B) fixed investment plus unplanned inventory investment. 
C) fixed investment. 
D) fixed investment plus planned inventory investment. 
A) fixed investment plus actual inventory investment. 
B) fixed investment plus unplanned inventory investment. 
C) fixed investment. 
D) fixed investment plus planned inventory investment.

Question 14

In the Keynesian cross diagram,an increase in investment spending because companies become more optimistic about investment profitability causes the aggregate demand function to shift ________ and the equilibrium level of aggregate output to ________,everything else held constant.

Accepted Answer

A) up; rise 
B) up; fall 
C) down; rise 
D) down; fall 
A) up; rise 
B) up; fall 
C) down; rise 
D) down; fall

Question 15

The Federal Reserve increases interest rates when it wants to reduce aggregate demand to fight inflation.How do increases in the interest rate reduce aggregate demand?

Accepted Answer

Increases in interest rates reduce plann

Question 16

An increase in government spending causes the equilibrium level of aggregate output to ________ at any given interest rate and shifts the ________ curve to the ________,everything else held constant.

Accepted Answer

A) rise; LM; right 
B) rise; IS; right 
C) fall; IS; left 
D) fall; LM; left 
A) rise; LM; right 
B) rise; IS; right 
C) fall; IS; left 
D) fall; LM; left

Question 17

Using the information in Situation 20-2,if taxes increase by $10,then the equilibrium aggregate output will change by

Accepted Answer

A) -$90. 
B) -$10. 
C) $10. 
D) $90. 
A) -$90. 
B) -$10. 
C) $10. 
D) $90.

Question 18

A rise in autonomous planned investment spending causes the equilibrium level of aggregate output to ________ and shifts the ________ curve to the ________,everything else held constant.

Accepted Answer

A) rise; LM; right 
B) rise; IS; right 
C) fall; IS; left 
D) fall; LM; left 
A) rise; LM; right 
B) rise; IS; right 
C) fall; IS; left 
D) fall; LM; left

Question 19

Assume that autonomous consumption equals $200 and disposable income equals $1000.If total consumption equal $800,then the mpc equals

Accepted Answer

A) 0.2. 
B) 0.6. 
C) 0.8. 
D) 1.0. 
A) 0.2. 
B) 0.6. 
C) 0.8. 
D) 1.0.

Question 20

Aggregate demand in an economy with no government or foreign trade is

Accepted Answer

A) consumer expenditure plus actual investment. 
B) consumer expenditure plus planned investment. 
C) consumer expenditure plus inventory investment. 
D) consumer expenditure plus fixed investment. 
A) consumer expenditure plus actual investment. 
B) consumer expenditure plus planned investment. 
C) consumer expenditure plus inventory investment. 
D) consumer expenditure plus fixed investment.

Exam 20: The Is Curve

Factors that influenced planned investment spending include:

If aggregate demand equals output,

If the consumption function is C = 20 + 0.8YD,then an increase in disposable income by $100 will result in an increase in consumer expenditure by

In the Keynesian framework,as long as output is ________ the equilibrium level,unplanned inventory investment will remain ________ and firms will continue to lower production.

In the Keynesian cross diagram,an increase in autonomous consumer expenditure causes the aggregate demand function to shift up,the equilibrium level of aggregate output to ________,and the IS curve to shift to the ________,everything else held constant.

In the Keynesian framework,as long as output is ________ the equilibrium level,unplanned inventory investment will remain negative and firms will continue to ________ production.

If American college students decide that drinking Mexican-brewed beer helps one get noticed,net exports will tend to fall,causing aggregate demand to ________ and the ________ curve to shift to the left,everything else held constant.

The negative relation between investment spending and the interest rate is what gives the ________ curve its ________ slope.

A decrease in interest rates

Everything else held constant,a shift in tastes in the U.S.towards American goods will ________ net exports in the U.S.and cause the quantity of aggregate output demanded to ________ in Mexico.

In the Keynesian framework,as long as output is below the equilibrium level,unplanned inventory investment will remain ________ and firms will continue to ________ production.

His analysis started with the recognition that the total quantity demanded of an economy's output was the sum of four types of spending: consumer expenditure,planned investment spending,government spending,and net exports.

Planned investment spending,a component of aggregate demand,is equal to

In the Keynesian cross diagram,an increase in investment spending because companies become more optimistic about investment profitability causes the aggregate demand function to shift ________ and the equilibrium level of aggregate output to ________,everything else held constant.

The Federal Reserve increases interest rates when it wants to reduce aggregate demand to fight inflation.How do increases in the interest rate reduce aggregate demand?

An increase in government spending causes the equilibrium level of aggregate output to ________ at any given interest rate and shifts the ________ curve to the ________,everything else held constant.

Using the information in Situation 20-2,if taxes increase by $10,then the equilibrium aggregate output will change by

A rise in autonomous planned investment spending causes the equilibrium level of aggregate output to ________ and shifts the ________ curve to the ________,everything else held constant.

Assume that autonomous consumption equals $200 and disposable income equals $1000.If total consumption equal $800,then the mpc equals

Aggregate demand in an economy with no government or foreign trade is

Why Study Money, banking, and Financial Markets

An Overview of the Financial System

What Is Money

Understanding Interest Rates

The Behavior of Interest Rates

The Risk and Term Structure of Interest Rates

The Stock Market, the Theory of Rational Expectations, and the Efficient Market Hypothesis

An Economic Analysis of Financial Structure

Financial Crises

Banking and the Management of Financial Institutions

Economic Analysis of Financial Regulation

Banking Industry: Structure and Competition

Central Banks and the Federal Reserve System

The Money Supply Process

Tools of Monetary Policy

The Conduct of Monetary Policy: Strategy and Tactics

The Foreign Exchange Market

The International Financial System

Quantity Theory,inflation and the Demand for Money

The Monetary Policy and Aggregate Demand Curves

Aggregate Demand and Supply Analysis

Monetary Policy Theory

The Role of Expectations in Monetary Policy

Transmission Mechanisms of Monetary Policy

The ISLM Model

Filters

If the consumption function is C = 20 + 0.8Y_D,then an increase in disposable income by $100 will result in an increase in consumer expenditure by

In the Keynesian framework,as long as output is the equilibrium level,unplanned inventory investment will remain and firms will continue to lower production.

In the Keynesian cross diagram,an increase in autonomous consumer expenditure causes the aggregate demand function to shift up,the equilibrium level of aggregate output to ,and the IS curve to shift to the ,everything else held constant.

In the Keynesian framework,as long as output is the equilibrium level,unplanned inventory investment will remain negative and firms will continue to production.

If American college students decide that drinking Mexican-brewed beer helps one get noticed,net exports will tend to fall,causing aggregate demand to and the curve to shift to the left,everything else held constant.

The negative relation between investment spending and the interest rate is what gives the curve its slope.

Everything else held constant,a shift in tastes in the U.S.towards American goods will net exports in the U.S.and cause the quantity of aggregate output demanded to in Mexico.

In the Keynesian framework,as long as output is below the equilibrium level,unplanned inventory investment will remain and firms will continue to production.

In the Keynesian cross diagram,an increase in investment spending because companies become more optimistic about investment profitability causes the aggregate demand function to shift and the equilibrium level of aggregate output to ,everything else held constant.

An increase in government spending causes the equilibrium level of aggregate output to at any given interest rate and shifts the curve to the ,everything else held constant.

A rise in autonomous planned investment spending causes the equilibrium level of aggregate output to and shifts the curve to the ,everything else held constant.