Question 1

An increase in money supply causes the real interest rate to ________ and output to ________ in the short run,before prices adjust to restore equilibrium.

Accepted Answer

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

Question 2

A rise in the price of a bond causes the yield of the bond to

Accepted Answer

A) rise. 
B) fall. 
C) remain unchanged. 
D) rise if it's a short-term bond, fall if it's a long-term bond. 
A) rise. 
B) fall. 
C) remain unchanged. 
D) rise if it's a short-term bond, fall if it's a long-term bond.

Question 3

Any change that reduces desired saving relative to desired investment (for a given level of output)causes the real interest rate to ________ and shifts the IS curve ________.

Accepted Answer

A) increase; down and to the left 
B) increase; up and to the right 
C) decrease; down and to the left 
D) decrease; up and to the right 
A) increase; down and to the left 
B) increase; up and to the right 
C) decrease; down and to the left 
D) decrease; up and to the right

Question 4

Which of the following curves in the IS-LM model is vertical?

Accepted Answer

A) The IS curve 
B) The LM curve 
C) The FE line 
D) The AD curve 
A) The IS curve 
B) The LM curve 
C) The FE line 
D) The AD curve

Question 5

Which market adjusts the quickest in response to shocks to the economy?

Accepted Answer

A) The asset market 
B) The labor market 
C) The goods market 
D) The asset, labor, and goods markets adjust at about the same speed to eliminate a disequilibrium in the macroeconomy. 
A) The asset market 
B) The labor market 
C) The goods market 
D) The asset, labor, and goods markets adjust at about the same speed to eliminate a disequilibrium in the macroeconomy.

Question 6

Which of the following changes shifts the AD curve up and to the right?

Accepted Answer

A) A rise in the nominal money supply 
B) An increase in income taxes 
C) An increase in the risk on nonmonetary assets 
D) A decrease in the future marginal productivity of capital 
A) A rise in the nominal money supply 
B) An increase in income taxes 
C) An increase in the risk on nonmonetary assets 
D) A decrease in the future marginal productivity of capital

Question 7

Identify changes in three variables that would cause the FE line to shift to the right.

Accepted Answer

An increase in productivity,an increase

Question 8

The LM curve illustrates that when income increases,the

Accepted Answer

A) price level must increase to clear the asset market. 
B) real interest rate on nonmonetary assets must increase to clear the asset market. 
C) price level must increase to clear the goods market. 
D) real interest rate on nonmonetary assets must increase to clear the goods market. 
A) price level must increase to clear the asset market. 
B) real interest rate on nonmonetary assets must increase to clear the asset market. 
C) price level must increase to clear the goods market. 
D) real interest rate on nonmonetary assets must increase to clear the goods market.

Question 9

The IS curve will shift down and to the left when

Accepted Answer

A) desired saving declines. 
B) government purchases increase. 
C) consumption increases. 
D) the expected future marginal product of capital declines. 
A) desired saving declines. 
B) government purchases increase. 
C) consumption increases. 
D) the expected future marginal product of capital declines.

Question 10

The long-run aggregate supply curve

Accepted Answer

A) is vertical. 
B) slopes upward. 
C) is horizontal. 
D) slopes downward. 
A) is vertical. 
B) slopes upward. 
C) is horizontal. 
D) slopes downward.

Question 11

An increase in labor supply would cause the IS curve to

Accepted Answer

A) shift up and to the right. 
B) shift down and to the left. 
C) remain unchanged. 
D) shift up and to the right only if people face borrowing constraints. 
A) shift up and to the right. 
B) shift down and to the left. 
C) remain unchanged. 
D) shift up and to the right only if people face borrowing constraints.

Question 12

The IS curve shows the combinations of output and the real interest rate for which

Accepted Answer

A) the goods market is in equilibrium. 
B) the labor market is in equilibrium. 
C) the financial asset market is in equilibrium. 
D) an increase in output will cause the market-clearing interest rate to be bid up. 
A) the goods market is in equilibrium. 
B) the labor market is in equilibrium. 
C) the financial asset market is in equilibrium. 
D) an increase in output will cause the market-clearing interest rate to be bid up.

Question 13

Describe what happens to the FE line if government purchases increase.

Accepted Answer

In the classical model of the labor mark

Question 14

A decrease in the effective tax rate on capital would cause the IS curve to

Accepted Answer

A) shift up and to the right. 
B) shift down and to the left. 
C) remain unchanged. 
D) remain unchanged if taxes are fully deductible from income; otherwise, shift up and to the right. 
A) shift up and to the right. 
B) shift down and to the left. 
C) remain unchanged. 
D) remain unchanged if taxes are fully deductible from income; otherwise, shift up and to the right.

Question 15

Which of the following changes shifts the long-run aggregate supply curve to the right?

Accepted Answer

A) A demographic change that increases the labor supply 
B) A decrease in the demand for labor 
C) An increase in consumer confidence 
D) A decrease in taxes (assuming Ricardian equivalence doesn't hold) 
A) A demographic change that increases the labor supply 
B) A decrease in the demand for labor 
C) An increase in consumer confidence 
D) A decrease in taxes (assuming Ricardian equivalence doesn't hold)

Question 16

Which of the following changes shifts the SRAS curve down?

Accepted Answer

A) An increase in the labor force 
B) An increase in the money supply 
C) A decrease in government purchases 
D) A decrease in firms' costs 
A) An increase in the labor force 
B) An increase in the money supply 
C) A decrease in government purchases 
D) A decrease in firms' costs

Question 17

What adjusts to restore general equilibrium after a shock to the economy?

Accepted Answer

A) The LM curve 
B) The IS curve 
C) The FE line 
D) The labor supply curve 
A) The LM curve 
B) The IS curve 
C) The FE line 
D) The labor supply curve

Question 18

Which of the following would shift the FE line to the left?

Accepted Answer

A) A beneficial supply shock 
B) A decrease in labor supply 
C) An increase in consumer spending 
D) An increase in the money supply 
A) A beneficial supply shock 
B) A decrease in labor supply 
C) An increase in consumer spending 
D) An increase in the money supply

Question 19

When all markets in the economy are simultaneously in equilibrium,we say

Accepted Answer

A) markets are complete. 
B) markets are perfect. 
C) there is disequilibrium. 
D) there is general equilibrium. 
A) markets are complete. 
B) markets are perfect. 
C) there is disequilibrium. 
D) there is general equilibrium.

Question 20

Desired consumption is Cd = 100 + 0.8Y - 500r - 0.5G,and desired investment is Id = 100 - 500r.Real money demand is Md/P = Y - 2000i.Other variables are πe = 0.05,G = 200,  $ \bar{\gamma} $
 = 1000,and M = 2100.
(a)Find the equilibrium values of the real interest rate,consumption,investment,and the price level.
(b)Suppose the money supply increases to 2800.Find the equilibrium values of the real interest rate,consumption,investment,and the price level.(Assume that the expected inflation rate is unchanged.)

Accepted Answer

(a)Use the equation Y = C^d + I^d + G = 300

An increase in money supply causes the real interest rate to and output to in the short run,before prices adjust to restore equilibrium.

A rise in the price of a bond causes the yield of the bond to

Any change that reduces desired saving relative to desired investment (for a given level of output)causes the real interest rate to and shifts the IS curve .

Which of the following curves in the IS-LM model is vertical?

Which market adjusts the quickest in response to shocks to the economy?

Which of the following changes shifts the AD curve up and to the right?

Identify changes in three variables that would cause the FE line to shift to the right.

The LM curve illustrates that when income increases,the

The IS curve will shift down and to the left when

The long-run aggregate supply curve

An increase in labor supply would cause the IS curve to

The IS curve shows the combinations of output and the real interest rate for which

Describe what happens to the FE line if government purchases increase.

A decrease in the effective tax rate on capital would cause the IS curve to

Which of the following changes shifts the long-run aggregate supply curve to the right?

Which of the following changes shifts the SRAS curve down?

What adjusts to restore general equilibrium after a shock to the economy?

Which of the following would shift the FE line to the left?

When all markets in the economy are simultaneously in equilibrium,we say

Introduction to Macroeconomics

The Measurement and Structure of the National Economy

Productivity, output, and Employment

Consumption, saving, and Investment

Saving and Investment in the Open Economy

Long-Run Economic Growth

The Asset Market, money, and Prices

Business Cycles

Classical Business Cycle Analysis

Keynesianism: the Macroeconomics of Wage and Price Rigidity

Unemployment and Inflation

Exchange Rates, business Cycles, and Macroeconomic Policy in the Open Economy

Monetary Policy and the Federal Reserve System

Government Spending and Its Financing

Filters

Exam 9: The Is-Lmad-As Model

An increase in money supply causes the real interest rate to ________ and output to ________ in the short run,before prices adjust to restore equilibrium.

A rise in the price of a bond causes the yield of the bond to

Any change that reduces desired saving relative to desired investment (for a given level of output)causes the real interest rate to ________ and shifts the IS curve ________.

Which of the following curves in the IS-LM model is vertical?

Which market adjusts the quickest in response to shocks to the economy?

Which of the following changes shifts the AD curve up and to the right?

Identify changes in three variables that would cause the FE line to shift to the right.

The LM curve illustrates that when income increases,the

The IS curve will shift down and to the left when

The long-run aggregate supply curve

An increase in labor supply would cause the IS curve to

The IS curve shows the combinations of output and the real interest rate for which

Describe what happens to the FE line if government purchases increase.

A decrease in the effective tax rate on capital would cause the IS curve to

Which of the following changes shifts the long-run aggregate supply curve to the right?

Which of the following changes shifts the SRAS curve down?

What adjusts to restore general equilibrium after a shock to the economy?

Which of the following would shift the FE line to the left?

When all markets in the economy are simultaneously in equilibrium,we say

Introduction to Macroeconomics

The Measurement and Structure of the National Economy

Productivity, output, and Employment

Consumption, saving, and Investment

Saving and Investment in the Open Economy

Long-Run Economic Growth

The Asset Market, money, and Prices

Business Cycles

Classical Business Cycle Analysis

Keynesianism: the Macroeconomics of Wage and Price Rigidity

Unemployment and Inflation

Exchange Rates, business Cycles, and Macroeconomic Policy in the Open Economy

Monetary Policy and the Federal Reserve System

Government Spending and Its Financing

Filters

An increase in money supply causes the real interest rate to and output to in the short run,before prices adjust to restore equilibrium.

Any change that reduces desired saving relative to desired investment (for a given level of output)causes the real interest rate to and shifts the IS curve .