Question 1

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 2

Actual investment spending is comprised of two components:

Accepted Answer

A) fixed investment and actual inventory investment. 
B) planned investment and fixed investment. 
C) unplanned investment and inventory investment. 
D) fixed business investment and fixed housing investment. 
A) fixed investment and actual inventory investment. 
B) planned investment and fixed investment. 
C) unplanned investment and inventory investment. 
D) fixed business investment and fixed housing investment.

Question 3

Use the following situation (20-1) to answer the question : Assume a closed economy with no government.  Suppose that autonomous consumption equals $400, planned investment equals $500, and the mpc equals 0.9.
-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 4

Assume that autonomous consumption equals $200 and that the mpc equals 0.8.If disposable income equals $1000,then total consumption equals

Accepted Answer

A) $80. 
B) $200. 
C) $800. 
D) $1000. 
A) $80. 
B) $200. 
C) $800. 
D) $1000.

Question 5

Points on the IS curve satisfy ________ market equilibrium.

Accepted Answer

A) money 
B) goods 
C) stock 
D) bond 
A) money 
B) goods 
C) stock 
D) bond

Question 6

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 7

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 8

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 9

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 10

If you know the value of the multiplier and the amount of a change in autonomous investment,you can calculate

Accepted Answer

A) the change in the interest rate. 
B) the change in the money supply. 
C) the change in money demand. 
D) the change in equilibrium output. 
A) the change in the interest rate. 
B) the change in the money supply. 
C) the change in money demand. 
D) the change in equilibrium output.

Question 11

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 12

As aggregate output rises,the demand for money ________ and the interest rate ________,so that money demanded equals money supplied and the money market is in equilibrium.

Accepted Answer

A) increases; rises 
B) increases; falls 
C) decreases; rises 
D) decreases; falls 
A) increases; rises 
B) increases; falls 
C) decreases; rises 
D) decreases; falls

Question 13

Show algebraically that the balanced-budget multiplier (that is,a matching change in both government expenditure and net taxes)is equal to one.

Accepted Answer

The multiplier for a change in governmen

Question 14

In the simple Keynesian model,equilibrium aggregate output is determined by

Accepted Answer

A) aggregate demand. 
B) aggregate supply. 
C) the national demand for labor. 
D) the price level. 
A) aggregate demand. 
B) aggregate supply. 
C) the national demand for labor. 
D) the price level.

Question 15

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 16

A fall in inventories is synonymous with ________ investment.

Accepted Answer

A) negative fixed 
B) positive fixed 
C) positive inventory 
D) negative inventory 
A) negative fixed 
B) positive fixed 
C) positive inventory 
D) negative inventory

Question 17

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 18

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 19

Aggregate output is ________ related to autonomous consumer expenditure,and is ________ related to planned investment spending.

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 20

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

Exam 20: The Islm Model

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 ________.

Actual investment spending is comprised of two components:

Assume that autonomous consumption equals $200 and that the mpc equals 0.8.If disposable income equals $1000,then total consumption equals

Points on the IS curve satisfy ________ market equilibrium.

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

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

Economists define investment as the purchase of

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

If you know the value of the multiplier and the amount of a change in autonomous investment,you can calculate

Keynes reasoned that consumer expenditure is most closely related to

As aggregate output rises,the demand for money ________ and the interest rate ________,so that money demanded equals money supplied and the money market is in equilibrium.

Show algebraically that the balanced-budget multiplier (that is,a matching change in both government expenditure and net taxes)is equal to one.

In the simple Keynesian model,equilibrium aggregate output is determined by

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

A fall in inventories is synonymous with ________ investment.

If aggregate demand equals output,

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

Aggregate output is ________ related to autonomous consumer expenditure,and is ________ related to planned investment spending.

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.

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 and the Subprime Meltdown

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 for Monetary Policy

The Conduct of Monetary Policy: Strategy and Tactics

The Foreign Exchange Market

The International Financial System

The Demand for Money

Monetary and Fiscal Policy in the ISLM Model

Aggregate Demand and Supply Analysis

Transmission Mechanisms of Monetary Policy: The Evidence

Money and Inflation

Rational Expectations: Implications for Policy

Filters

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 .

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

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

As aggregate output rises,the demand for money and the interest rate ,so that money demanded equals money supplied and the money market is in equilibrium.

Aggregate output is related to autonomous consumer expenditure,and is related to planned investment spending.