Question 1

For the goods market to be in equilibrium in a closed economy,which of the following must be true?

Accepted Answer

A)  Y = S + I + G 
B)  S + I = C + G 
C)  S + G = Y + C 
D)  S = I 
A)  Y = S + I + G 
B)  S + I = C + G 
C)  S + G = Y + C 
D)  S = I

Question 2

Which of the following would NOT cause a shift in the IS curve?

Accepted Answer

A)  an increase in the domestic real interest rate 
B)  an increase in consumer confidence 
C)  a decrease in the expected future profitability of capital 
D)  a decrease in government purchases 
A)  an increase in the domestic real interest rate 
B)  an increase in consumer confidence 
C)  a decrease in the expected future profitability of capital 
D)  a decrease in government purchases

Question 3

The IS curve depicts the relationship between

Accepted Answer

A)  aggregate output and the real interest rate. 
B)  investment demand and the real interest rate. 
C)  investment demand and the level of current output. 
D)  national saving and the level of current output. 
A)  aggregate output and the real interest rate. 
B)  investment demand and the real interest rate. 
C)  investment demand and the level of current output. 
D)  national saving and the level of current output.

Question 4

A decline in the output gap causes the demand for real balances

Accepted Answer

A)  to rise and the interest rate to fall. 
B)  to fall and the interest rate to rise. 
C)  and the interest rate to fall. 
D)  and the interest rate to rise. 
A)  to rise and the interest rate to fall. 
B)  to fall and the interest rate to rise. 
C)  and the interest rate to fall. 
D)  and the interest rate to rise.

Question 5

If a $10 billion increase in investment leads to a $20 billion increase in GDP,the multiplier is

Accepted Answer

A)  0.5 
B)  2 
C)  10 
D)  30 
A)  0.5 
B)  2 
C)  10 
D)  30

Question 6

Monetary policy can have substantial effects on the economy even when nominal interest rates are very low

Accepted Answer

A)  since real rates are what affects borrowing and spending decisions. 
B)  by improving borrower and bank balance sheets. 
C)  by reducing transactions costs. 
D)  only when the policy is substantial. 
A)  since real rates are what affects borrowing and spending decisions. 
B)  by improving borrower and bank balance sheets. 
C)  by reducing transactions costs. 
D)  only when the policy is substantial.

Question 7

Economists who have studied the Phillips curve have concluded that it can shift due to all of the following EXCEPT

Accepted Answer

A)  demand shccks. 
B)  supply shocks. 
C)  changes in household expectations of inflation. 
D)  changes in firms' expectations of inflation. 
A)  demand shccks. 
B)  supply shocks. 
C)  changes in household expectations of inflation. 
D)  changes in firms' expectations of inflation.

Question 8

In a closed economy,the goods market is in equilibrium when

Accepted Answer

A)  Y = S + I + G. 
B)  C + S = I + G. 
C)  C + I = S + G. 
D)  Y = C + I + G. 
A)  Y = S + I + G. 
B)  C + S = I + G. 
C)  C + I = S + G. 
D)  Y = C + I + G.

Question 9

In the IS-MP model,when the Fed increases the real interest rate

Accepted Answer

A)  the MP curve shifts up resulting in a decline in the output gap. 
B)  the MP curve shifts up resulting in an increase in the output gap. 
C)  the MP curve shifts down resulting in a decline in the output gap. 
D)  the MP curve shifts down resulting in an increase in the output gap. 
A)  the MP curve shifts up resulting in a decline in the output gap. 
B)  the MP curve shifts up resulting in an increase in the output gap. 
C)  the MP curve shifts down resulting in a decline in the output gap. 
D)  the MP curve shifts down resulting in an increase in the output gap.

Question 10

The series of induced changes in consumption spending that result from an initial change in autonomous expenditure is called the

Accepted Answer

A)  induced effect. 
B)  autonomous effect. 
C)  multiplier effect. 
D)  consumption effect 
A)  induced effect. 
B)  autonomous effect. 
C)  multiplier effect. 
D)  consumption effect

Question 11

In a closed economy,the total quantity of goods demanded equals the sum of

Accepted Answer

A)  consumption spending, investment spending, and government spending. 
B)  consumption spending, national saving, and taxes. 
C)  consumption spending, government spending, and taxes. 
D)  investment spending, national saving, and taxes. 
A)  consumption spending, investment spending, and government spending. 
B)  consumption spending, national saving, and taxes. 
C)  consumption spending, government spending, and taxes. 
D)  investment spending, national saving, and taxes.

Question 12

How does an expansionary monetary policy affect aggregate expenditures according to the bank lending channel?

Accepted Answer

In the bank lending channel,an expansion

Question 13

The MP curve represents

Accepted Answer

A)  the Fed's monetary policy actions in setting a target for the federal funds rate. 
B)  the relationship between the money supply and the price level. 
C)  a relationship between the real interest rate and manufacturing production. 
D)  the relationship between real interest rates and potential GDP. 
A)  the Fed's monetary policy actions in setting a target for the federal funds rate. 
B)  the relationship between the money supply and the price level. 
C)  a relationship between the real interest rate and manufacturing production. 
D)  the relationship between real interest rates and potential GDP.

Question 14

In a simple model of the economy,if the MPC is 0.8,the multiplier will equal

Accepted Answer

A)  0.2 
B)  0.8 
C)  1.25 
D)  5 
A)  0.2 
B)  0.8 
C)  1.25 
D)  5

Question 15

The LM curve is the combinations of

Accepted Answer

A)  the output gap and the real interest rate for which the money market is in equilibrium. 
B)  the inflation rate and nominal interest rate for which the money market is in equilibrium. 
C)  the inflation rate and real interest rate for which the money market is in equilibrium. 
D)  the inflation rate and real interest rate for which the goods market is in equilibrium. 
A)  the output gap and the real interest rate for which the money market is in equilibrium. 
B)  the inflation rate and nominal interest rate for which the money market is in equilibrium. 
C)  the inflation rate and real interest rate for which the money market is in equilibrium. 
D)  the inflation rate and real interest rate for which the goods market is in equilibrium.

Question 16

The level of potential GDP

Accepted Answer

A)  increases as the real rate of interest decreases. 
B)  increases as the real rate of interest increases. 
C)  is unaffected by the real rate of interest. 
D)  is represented on the IS-MP model by a horizontal line at the world real rate of interest. 
A)  increases as the real rate of interest decreases. 
B)  increases as the real rate of interest increases. 
C)  is unaffected by the real rate of interest. 
D)  is represented on the IS-MP model by a horizontal line at the world real rate of interest.

Question 17

How can the difference between the current unemployment rate and the natural rate of unemployment help explain changes in inflation?

Accepted Answer

When the current unemployment rate is gr

Question 18

In a move up the IS curve,

Accepted Answer

A)  investment rises. 
B)  output falls. 
C)  the real interest rate falls. 
D)  saving rises. 
A)  investment rises. 
B)  output falls. 
C)  the real interest rate falls. 
D)  saving rises.

Question 19

Explain how does an increase in real interest rates affect the components of AE.

Accepted Answer

An increase in the real interest rate ma

Question 20

What is the multiplier? If MPC =0.75,what is the value of the multiplier in the simple model of the economy?

Accepted Answer

The multiplier is the change i

For the goods market to be in equilibrium in a closed economy,which of the following must be true?

Which of the following would NOT cause a shift in the IS curve?

The IS curve depicts the relationship between

A decline in the output gap causes the demand for real balances

If a $10 billion increase in investment leads to a $20 billion increase in GDP,the multiplier is

Monetary policy can have substantial effects on the economy even when nominal interest rates are very low

Economists who have studied the Phillips curve have concluded that it can shift due to all of the following EXCEPT

In a closed economy,the goods market is in equilibrium when

In the IS-MP model,when the Fed increases the real interest rate

The series of induced changes in consumption spending that result from an initial change in autonomous expenditure is called the

In a closed economy,the total quantity of goods demanded equals the sum of

How does an expansionary monetary policy affect aggregate expenditures according to the bank lending channel?

The MP curve represents

In a simple model of the economy,if the MPC is 0.8,the multiplier will equal

The LM curve is the combinations of

The level of potential GDP

How can the difference between the current unemployment rate and the natural rate of unemployment help explain changes in inflation?

In a move up the IS curve,

Explain how does an increase in real interest rates affect the components of AE.

What is the multiplier? If MPC =0.75,what is the value of the multiplier in the simple model of the economy?

Introducing Money and the Financial System

Money and the Payments System

Interest Rates and Rates of Return

Determining Interest Rates

The Risk Structure and Term Structure of Interest Rates

The Stock Market, information, and Financial Market Efficiency

Derivatives and Derivative Markets

The Market for Foreign Exchange

Transactions Costs, asymmetric Information, and the Structure of the Financial System

The Economics of Banking

Investment Banks, mutual Funds, hedge Funds, and the Shadow Banking System

Financial Crises and Financial Regulation

The Federal Reserve and Central Banking

The Federal Reserves Balance Sheet and the Money Supply Process

Monetary Policy

The International Financial System and Monetary Policy

Monetary Theory I: the Aggregate Demand and Aggregate Supply Model

Filters

Exam 18: Monetary Theory Ii: the Is-Mp Model

For the goods market to be in equilibrium in a closed economy,which of the following must be true?

Which of the following would NOT cause a shift in the IS curve?

The IS curve depicts the relationship between

A decline in the output gap causes the demand for real balances

If a $10 billion increase in investment leads to a $20 billion increase in GDP,the multiplier is

Monetary policy can have substantial effects on the economy even when nominal interest rates are very low

Economists who have studied the Phillips curve have concluded that it can shift due to all of the following EXCEPT

In a closed economy,the goods market is in equilibrium when

In the IS-MP model,when the Fed increases the real interest rate

The series of induced changes in consumption spending that result from an initial change in autonomous expenditure is called the

In a closed economy,the total quantity of goods demanded equals the sum of

How does an expansionary monetary policy affect aggregate expenditures according to the bank lending channel?

The MP curve represents

In a simple model of the economy,if the MPC is 0.8,the multiplier will equal

The LM curve is the combinations of

The level of potential GDP

How can the difference between the current unemployment rate and the natural rate of unemployment help explain changes in inflation?

In a move up the IS curve,

Explain how does an increase in real interest rates affect the components of AE.

What is the multiplier? If MPC =0.75,what is the value of the multiplier in the simple model of the economy?

Introducing Money and the Financial System

Money and the Payments System

Interest Rates and Rates of Return

Determining Interest Rates

The Risk Structure and Term Structure of Interest Rates

The Stock Market, information, and Financial Market Efficiency

Derivatives and Derivative Markets

The Market for Foreign Exchange

Transactions Costs, asymmetric Information, and the Structure of the Financial System

The Economics of Banking

Investment Banks, mutual Funds, hedge Funds, and the Shadow Banking System

Financial Crises and Financial Regulation

The Federal Reserve and Central Banking

The Federal Reserves Balance Sheet and the Money Supply Process

Monetary Policy

The International Financial System and Monetary Policy

Monetary Theory I: the Aggregate Demand and Aggregate Supply Model

Filters