Question 1

If the consumption function is expressed as C = a + mpc × YD,then "mpc" represents

Accepted Answer

A)  autonomous consumer expenditure. 
B)  the marginal propensity to consume. 
C)  the expenditure multiplier. 
D)  disposable income. 
A)  autonomous consumer expenditure. 
B)  the marginal propensity to consume. 
C)  the expenditure multiplier. 
D)  disposable income.

Question 2

A tax cut ________ disposable income,________ consumption expenditure,and shifts the IS curve to the ________,everything else held constant.

Accepted Answer

A)  increases; increases; right 
B)  increases; decreases; right 
C)  decreases; increases; left 
D)  decreases; decreases; left 
A)  increases; increases; right 
B)  increases; decreases; right 
C)  decreases; increases; left 
D)  decreases; decreases; left

Question 3

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 4

When the level of unplanned inventory investment is equal to zero,the economy is

Accepted Answer

A)  in disequilibrium. 
B)  in a recession. 
C)  in equilibrium. 
D)  overheating 
A)  in disequilibrium. 
B)  in a recession. 
C)  in equilibrium. 
D)  overheating

Question 5

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 6

A decline in taxes ________ consumer expenditure and shifts the ________ curve to the ________,everything else held constant.

Accepted Answer

A)  raises; LM; right 
B)  lowers; IS; left 
C)  raises; IS; right 
D)  lowers; LM; left 
A)  raises; LM; right 
B)  lowers; IS; left 
C)  raises; IS; right 
D)  lowers; LM; left

Question 7

An autonomous depreciation of the U.S.dollar makes American goods ________ relative to foreign goods and results in a ________ in U.S.net exports,everything else held constant.

Accepted Answer

A)  cheaper; decline 
B)  cheaper; rise 
C)  more expensive; decline 
D)  more expensive; rise 
A)  cheaper; decline 
B)  cheaper; rise 
C)  more expensive; decline 
D)  more expensive; rise

Question 8

Using the information in Situation 20-1,if aggregate output equals $8,000,the unplanned inventory investment equals

Accepted Answer

A)  -$100 
B)  $0 
C)  $100 
D)  $500 
A)  -$100 
B)  $0 
C)  $100 
D)  $500

Question 9

A decrease in autonomous planned investment spending,other things equal,shifts the ________ curve to the ________.

Accepted Answer

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

Question 10

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 11

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 12

Economists define investment as the purchase of

Accepted Answer

A)  a new physical asset such as a new machine or a new house. 
B)  any physical asset, whether new or not, used by business to increase production. 
C)  any physical asset used by business to increase production and the repurchase of common stock. 
D)  business spending on capital and household spending on durable goods. 
A)  a new physical asset such as a new machine or a new house. 
B)  any physical asset, whether new or not, used by business to increase production. 
C)  any physical asset used by business to increase production and the repurchase of common stock. 
D)  business spending on capital and household spending on durable goods.

Question 13

The ________ describes points for which the goods market is in equilibrium.

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 14

If the consumption function is C = 20 + 0.5YD,then an increase in disposable income by $100 will result in an increase in consumer expenditure by

Accepted Answer

A)  $25. 
B)  $70. 
C)  $50. 
D)  $100. 
A)  $25. 
B)  $70. 
C)  $50. 
D)  $100.

Question 15

Using the information contained in Situation 20-1,if autonomous consumption increases by $100,then 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.

Question 16

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 17

A shift in tastes toward American goods ________ net exports in the U.S.and causes the IS curve to shift to the ________ in the U.S.,everything else held constant.

Accepted Answer

A)  decreases; right 
B)  decreases; left 
C)  increases; right 
D)  increases; left 
A)  decreases; right 
B)  decreases; left 
C)  increases; right 
D)  increases; left

Question 18

Using the information in Situation 20-1,if aggregate output is equal to $10,000,then unplanned inventory investment equals

Accepted Answer

A)  -$1000 
B)  -$100 
C)  $0 
D)  $100 
A)  -$1000 
B)  -$100 
C)  $0 
D)  $100

Question 19

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 20

Assume that disposable income equals $1000 and the mpc equals 0.6. If total consumption equal $800,then autonomous consumption is equal to

Accepted Answer

A)  $0. 
B)  $200. 
C)  $800. 
D)  $1000. 
A)  $0. 
B)  $200. 
C)  $800. 
D)  $1000.

Exam 20: The Is Curve

If the consumption function is expressed as C = a + mpc × YD,then "mpc" represents

A tax cut ________ disposable income,________ consumption expenditure,and shifts the IS curve to the ________,everything else held constant.

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

When the level of unplanned inventory investment is equal to zero,the economy is

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.

A decline in taxes ________ consumer expenditure and shifts the ________ curve to the ________,everything else held constant.

An autonomous depreciation of the U.S.dollar makes American goods ________ relative to foreign goods and results in a ________ in U.S.net exports,everything else held constant.

Using the information in Situation 20-1,if aggregate output equals $8,000,the unplanned inventory investment equals

A decrease in autonomous planned investment spending,other things equal,shifts the ________ curve to the ________.

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

A decrease in interest rates

Economists define investment as the purchase of

The ________ describes points for which the goods market is in equilibrium.

If the consumption function is C = 20 + 0.5YD,then an increase in disposable income by $100 will result in an increase in consumer expenditure by

Using the information contained in Situation 20-1,if autonomous consumption increases by $100,then equilibrium aggregate output will change 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.

A shift in tastes toward American goods ________ net exports in the U.S.and causes the IS curve to shift to the ________ in the U.S.,everything else held constant.

Using the information in Situation 20-1,if aggregate output is equal to $10,000,then unplanned inventory investment equals

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

Assume that disposable income equals $1000 and the mpc equals 0.6. If total consumption equal $800,then autonomous consumption is equal to

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

A tax cut disposable income, consumption expenditure,and shifts the IS curve to the ,everything else held constant.

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

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.

A decline in taxes consumer expenditure and shifts the curve to the ,everything else held constant.

An autonomous depreciation of the U.S.dollar makes American goods relative to foreign goods and results in a in U.S.net exports,everything else held constant.

A decrease in autonomous planned investment spending,other things equal,shifts the curve to the .

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

A shift in tastes toward American goods net exports in the U.S.and causes the IS curve to shift to the in the U.S.,everything else held constant.