Question 1

If unplanned investment is positive,firms will ________ production and output will ________.

Accepted Answer

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

Question 2

An increase in autonomous consumer expenditure 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;LM;left 
D) fall;IS;left 
A) rise;LM;right 
B) rise;IS;right 
C) fall;LM;left 
D) fall;IS;left B

Question 3

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. D

Question 4

If aggregated demand is less than actual output,unplanned inventory ________ will cause output to ________.

Accepted Answer

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

Question 5

The Keynesian framework indicates that government can play an important role in determining aggregate output by

Accepted Answer

A) changing the level of government spending or taxes. 
B) raising consumer confidence. 
C) raising investor confidence. 
D) changing the money supply and interest rates. 
A) changing the level of government spending or taxes. 
B) raising consumer confidence. 
C) raising investor confidence. 
D) changing the money supply and interest rates.

Question 6

If the interest rate falls,other things being equal,investment spending will

Accepted Answer

A) fall. 
B) rise. 
C) either rise,fall,or remain unchanged. 
D) not be affected. 
A) fall. 
B) rise. 
C) either rise,fall,or remain unchanged. 
D) not be affected.

Question 7

The ________ traces out the points for which total quantity of goods produced equals total quantity of goods demanded.

Accepted Answer

A) LM curve 
B) IS curve 
C) consumption function 
D) investment schedule 
A) LM curve 
B) IS curve 
C) consumption function 
D) investment schedule

Question 8

Keynes's motivation in developing the aggregate output determination model stemmed from his concern with explaining

Accepted Answer

A) the hyperinflations of the 1920s. 
B) why the Great Depression occurred. 
C) the high unemployment in Great Britain before World War I. 
D) the high unemployment in Great Britain after World War II. 
A) the hyperinflations of the 1920s. 
B) why the Great Depression occurred. 
C) the high unemployment in Great Britain before World War I. 
D) the high unemployment in Great Britain after World War II.

Question 9

A decrease in unplanned inventory investment for the entire economy equals the excess of

Accepted Answer

A) output over aggregate supply. 
B) output over aggregate demand. 
C) aggregate supply over output. 
D) aggregate demand over output. 
A) output over aggregate supply. 
B) output over aggregate demand. 
C) aggregate supply over output. 
D) aggregate demand over output.

Question 10

A difference between inventory investment and fixed investment is that

Accepted Answer

A) fixed investment is never unplanned. 
B) fixed investment is never planned. 
C) inventory investment is never unplanned. 
D) unplanned inventory investment is always zero. 
A) fixed investment is never unplanned. 
B) fixed investment is never planned. 
C) inventory investment is never unplanned. 
D) unplanned inventory investment is always zero.

Question 11

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 12

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 13

Keynes reasoned that consumer expenditure is most closely related to

Accepted Answer

A) the level of interest rates. 
B) the price level. 
C) disposable income. 
D) the marginal tax rate. 
A) the level of interest rates. 
B) the price level. 
C) disposable income. 
D) the marginal tax rate.

Question 14

A shift in tastes toward foreign goods ________ net exports in the U.S.and causes the quantity of aggregate output demanded to ________ in the U.S.,everything else held constant.

Accepted Answer

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

Question 15

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

Accepted Answer

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

Question 16

The marginal propensity to consume (mpc)can be defined as the fraction of

Accepted Answer

A) a change in income that is spent. 
B) a change in income that is saved. 
C) income that is spent. 
D) income that is saved. 
A) a change in income that is spent. 
B) a change in income that is saved. 
C) income that is spent. 
D) income that is saved.

Question 17

Which of the following does NOT shift the IS curve?

Accepted Answer

A) an increase in autonomous consumption 
B) an increase in government spending 
C) a decline in government spending 
D) a fall in the interest rate 
A) an increase in autonomous consumption 
B) an increase in government spending 
C) a decline in government spending 
D) a fall in the interest rate

Question 18

Aggregate output is ________ related to autonomous consumer expenditure,and is ________ related to the level of taxes.

Accepted Answer

A) negatively;negatively 
B) negatively;positively 
C) positively;negatively 
D) positively;positively 
A) negatively;negatively 
B) negatively;positively 
C) positively;negatively 
D) positively;positively

Question 19

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 20

Using the information contained in Situation 20-1,if planned investment decreases by $100,the equilibrium aggregate output will change by

Accepted Answer

A) -$1,000. 
B) $-100. 
C) $100. 
D) $1,000. 
A) -$1,000. 
B) $-100. 
C) $100. 
D) $1,000.

Exam 20: The Is Curve

If unplanned investment is positive,firms will ________ production and output will ________.

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

A decrease in interest rates

If aggregated demand is less than actual output,unplanned inventory ________ will cause output to ________.

The Keynesian framework indicates that government can play an important role in determining aggregate output by

If the interest rate falls,other things being equal,investment spending will

The ________ traces out the points for which total quantity of goods produced equals total quantity of goods demanded.

Keynes's motivation in developing the aggregate output determination model stemmed from his concern with explaining

A decrease in unplanned inventory investment for the entire economy equals the excess of

A difference between inventory investment and fixed investment is that

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

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

Keynes reasoned that consumer expenditure is most closely related to

A shift in tastes toward foreign goods ________ net exports in the U.S.and causes the quantity of aggregate output demanded to ________ in the U.S.,everything else held constant.

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

The marginal propensity to consume (mpc)can be defined as the fraction of

Which of the following does NOT shift the IS curve?

Aggregate output is ________ related to autonomous consumer expenditure,and is ________ related to the level of taxes.

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.

Using the information contained in Situation 20-1,if planned investment decreases by $100,the equilibrium aggregate output will change by

Why Study Money, banking, and Financial Markets

An Overview of the Financial System

What Is Money

The Meaning of 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

Banking and the Management of Financial Institutions

Economic Analysis of Financial Regulation

Banking Industry: Structure and Competition

Financial Crises

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

Web 1:financial Crises in Emerging Market Economies

Web 2:the Islm Model

Web 3:nonbank Finance

Web 4:financial Derivatives

Web 5:conflicts of Interest in the Financial Services Industry

Filters

If unplanned investment is positive,firms will production and output will .

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

If aggregated demand is less than actual output,unplanned inventory will cause output to .

A shift in tastes toward foreign goods net exports in the U.S.and causes the quantity of aggregate output demanded to in the U.S.,everything else held constant.

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

Aggregate output is related to autonomous consumer expenditure,and is related to the level of taxes.

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.