Question 1

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 B

Question 2

Everything else held constant, if aggregate output is to the left of the IS curve, then there is an excess ________ of goods which will cause aggregate output to ________.

Accepted Answer

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

Question 3

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

Question 4

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

Question 5

In the Keynesian framework, as long as output is ________ the equilibrium level, unplanned inventory investment will remain positive 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 6

If net exports increase by 100 and the mpc is 0.75, equilibrium aggregate output increases by ________.

Accepted Answer

A) 100 
B) 250 
C) 400 
D) 750 
A) 100 
B) 250 
C) 400 
D) 750

Question 7

What is the role of the government, according to Keynes, in stimulating the economy, raising aggregate output and reducing unemployment when the economy is in a recession?

Accepted Answer

Keynes realized that government spending

Question 8

Other things equal, a decrease in autonomous consumption 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 9

An increase 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

What is the marginal propensity to consume according to Keynes's consumption theory? provide an example.

Accepted Answer

Marginal propensity to consume or mpc is

Question 11

Everything else held constant, if disposable income increases by 200 and consumption expenditure increases by 150, the mpc is ________.

Accepted Answer

A) 0 
B) 0)15 
C) 0)5 
D) 0)75 
A) 0 
B) 0)15 
C) 0)5 
D) 0)75

Question 12

An autonomous depreciation of the Canadian dollar makes Canadian goods ________ relative to foreign goods and results in a ________ in Canadian 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 13

Situation 20-2
Assume a closed economy. Suppose that autonomous consumption equals $400, planned investment equals $500, government expenditure equals $200, net taxes equals $50, and the mpc equals 0.9.
-Using the information in situation 20-2, if government increases their spending by $50 and increases net taxes by 50, then equilibrium aggregate output will change by ________.

Accepted Answer

A) -$100 
B) -$50 
C) $50 
D) $100 
A) -$100 
B) -$50 
C) $50 
D) $100

Question 14

An increase 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 15

What are the factors that can shift the IS curve to the right?

Accepted Answer

The factors that can shift the IS curve

Question 16

What types of investment exist according to Keynes's theory of the determination of aggregate output? what is a major difference between the two according to Keynes?

Accepted Answer

According to Keynes there are two types

Question 17

Everything else held constant, if aggregate output is to the ________ of the IS curve, then there is an excess demand of goods which will cause aggregate output to ________.

Accepted Answer

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

Question 18

A decrease in investment spending because companies become more pessimistic about investment profitability causes the aggregate demand function to shift down, 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 19

Equilibrium output is reduced by an increase in ________.

Accepted Answer

A) planned investment 
B) taxes 
C) government spending 
D) net exports 
A) planned investment 
B) taxes 
C) government spending 
D) net exports

Question 20

Describe Keynes's equilibrium condition and what it implies.

Accepted Answer

Equilibrium occurs when the total quanti

Exam 21: The Is Curve

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

Everything else held constant, if aggregate output is to the left of the IS curve, then there is an excess ________ of goods which will cause aggregate output to ________.

A reduction 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.

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

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

If net exports increase by 100 and the mpc is 0.75, equilibrium aggregate output increases by ________.

What is the role of the government, according to Keynes, in stimulating the economy, raising aggregate output and reducing unemployment when the economy is in a recession?

Other things equal, a decrease in autonomous consumption shifts the ________ curve to the ________.

An increase in interest rates ________.

What is the marginal propensity to consume according to Keynes's consumption theory? provide an example.

Everything else held constant, if disposable income increases by 200 and consumption expenditure increases by 150, the mpc is ________.

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

An increase in unplanned inventory investment for the entire economy equals the excess of ________.

What are the factors that can shift the IS curve to the right?

What types of investment exist according to Keynes's theory of the determination of aggregate output? what is a major difference between the two according to Keynes?

Everything else held constant, if aggregate output is to the ________ of the IS curve, then there is an excess demand of goods which will cause aggregate output to ________.

A decrease in investment spending because companies become more pessimistic about investment profitability causes the aggregate demand function to shift down, the equilibrium level of aggregate output to ________, and the IS curve to shift to the ________, everything else held constant.

Equilibrium output is reduced by an increase in ________.

Describe Keynes's equilibrium condition and what it implies.

Why Study Money, Banking, and Financial Markets

An Overview of the Financial System

What Is Money

Understanding Interest Rates

The Behaviour 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

Economic Analysis of Financial Regulation

Banking Industry: Structure and Competition

Banking and the Management of Financial Institutions

Risk Management With Financial Derivatives

Central Banks and the Bank of Canada

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

Financial Crises in Emerging Markets

The ISLM Model

Non-Bank Finance

Filters

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

Everything else held constant, if aggregate output is to the left of the IS curve, then there is an excess of goods which will cause aggregate output to .

A reduction 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.

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

Other things equal, a decrease in autonomous consumption shifts the curve to the .

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

Everything else held constant, if aggregate output is to the of the IS curve, then there is an excess demand of goods which will cause aggregate output to .

A decrease in investment spending because companies become more pessimistic about investment profitability causes the aggregate demand function to shift down, the equilibrium level of aggregate output to , and the IS curve to shift to the , everything else held constant.