Question 1

An increase in expected inflation causes the real interest rate to ________ and output to ________ in the short run,before prices adjust to restore equilibrium.

Accepted Answer

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

Question 2

You have just read that Australia has suffered a drought,destroying its wheat crop for this year.The effect of this adverse supply shock on Australia would probably be

Accepted Answer

A) an increase in prices and an increase in real interest rates. 
B) an increase in prices,an increase in nominal interest rates,but a decrease in real interest rates. 
C) a decrease in prices and a decrease in real interest rates. 
D) a decrease in prices,a decrease in nominal interest rates,but an increase in real interest rates. 
A) an increase in prices and an increase in real interest rates. 
B) an increase in prices,an increase in nominal interest rates,but a decrease in real interest rates. 
C) a decrease in prices and a decrease in real interest rates. 
D) a decrease in prices,a decrease in nominal interest rates,but an increase in real interest rates.

Question 3

In classical IS-LM analysis,the effects of a decline in desired investment include

Accepted Answer

A) a decline in output. 
B) an increase in the price level. 
C) a decline in the real interest rate. 
D) an increase in unemployment. 
A) a decline in output. 
B) an increase in the price level. 
C) a decline in the real interest rate. 
D) an increase in unemployment.

Question 4

A decrease in the money supply would cause the IS curve to ________ and the LM curve to ________.

Accepted Answer

A) shift down and to the left; be unchanged 
B) shift down and to the left; shift up and to the left 
C) be unchanged; shift up and to the left 
D) be unchanged; shift down and to the right 
A) shift down and to the left; be unchanged 
B) shift down and to the left; shift up and to the left 
C) be unchanged; shift up and to the left 
D) be unchanged; shift down and to the right

Question 5

When the money supply declines by 10%,in the long run,output ________ and the price level ________.

Accepted Answer

A) is unchanged; is unchanged 
B) declines; falls 
C) is unchanged; falls 
D) declines; is unchanged 
A) is unchanged; is unchanged 
B) declines; falls 
C) is unchanged; falls 
D) declines; is unchanged

Question 6

The LM curve

Accepted Answer

A) is horizontal. 
B) is vertical. 
C) slopes downward. 
D) slopes upward. 
A) is horizontal. 
B) is vertical. 
C) slopes downward. 
D) slopes upward.

Question 7

Banks decide to raise the interest rate they pay on checking accounts from 1% to 2%.This action would

Accepted Answer

A) increase money demand,shifting the LM curve up and to the left. 
B) increase money demand,shifting the LM curve down and to the right. 
C) decrease money demand,shifting the LM curve up and to the left. 
D) decrease money demand,shifting the LM curve down and to the right. 
A) increase money demand,shifting the LM curve up and to the left. 
B) increase money demand,shifting the LM curve down and to the right. 
C) decrease money demand,shifting the LM curve up and to the left. 
D) decrease money demand,shifting the LM curve down and to the right.

Question 8

The IS curve will shift down and to the left when

Accepted Answer

A) desired saving declines. 
B) government purchases increase. 
C) consumption increases. 
D) the expected future marginal product of capital declines. 
A) desired saving declines. 
B) government purchases increase. 
C) consumption increases. 
D) the expected future marginal product of capital declines.

Question 9

Suppose the intersection of the IS and LM curves is to the left of the FE line.What would most likely eliminate a disequilibrium among the asset,labor,and goods markets?

Accepted Answer

A) A rise in the price level,shifting the LM curve up and to the left 
B) A fall in the price level,shifting the LM curve down and to the right 
C) A rise in the price level,shifting the IS curve up and to the right 
D) A fall in the price level,shifting the IS curve down and to the left 
A) A rise in the price level,shifting the LM curve up and to the left 
B) A fall in the price level,shifting the LM curve down and to the right 
C) A rise in the price level,shifting the IS curve up and to the right 
D) A fall in the price level,shifting the IS curve down and to the left

Question 10

An increase in money supply causes the real interest rate to ________ and output to ________ in the short run,before prices adjust to restore equilibrium.

Accepted Answer

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

Question 11

A temporary decrease in government purchases causes the real interest rate to ________ and output to ________ in the short run,before prices adjust to restore equilibrium.

Accepted Answer

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

Question 12

Which of the following would shift the FE line to the left?

Accepted Answer

A) A beneficial supply shock 
B) An increase in labor supply 
C) A decrease in the capital stock 
D) A decrease in the future marginal productivity of capital 
A) A beneficial supply shock 
B) An increase in labor supply 
C) A decrease in the capital stock 
D) A decrease in the future marginal productivity of capital

Question 13

A decline in expected future output would cause the IS curve to

Accepted Answer

A) shift up and to the right. 
B) shift down and to the left. 
C) remain unchanged. 
D) shift up and to the right only if people face borrowing constraints. 
A) shift up and to the right. 
B) shift down and to the left. 
C) remain unchanged. 
D) shift up and to the right only if people face borrowing constraints.

Question 14

A decrease in wealth would cause the IS curve to

Accepted Answer

A) shift up and to the right. 
B) shift down and to the left. 
C) remain unchanged. 
D) shift up and to the right only if people face borrowing constraints. 
A) shift up and to the right. 
B) shift down and to the left. 
C) remain unchanged. 
D) shift up and to the right only if people face borrowing constraints.

Question 15

The short-run aggregate supply curve (in the absence of misperceptions)

Accepted Answer

A) is vertical. 
B) slopes upward. 
C) is horizontal. 
D) slopes downward. 
A) is vertical. 
B) slopes upward. 
C) is horizontal. 
D) slopes downward.

Question 16

Under monetary neutrality,an increase in the money supply causes output to ________ and the price level to ________.

Accepted Answer

A) rise; rise 
B) rise; not change 
C) not change; not change 
D) not change; rise 
A) rise; rise 
B) rise; not change 
C) not change; not change 
D) not change; rise

Question 17

A temporary supply shock,such as a bumper crop,would

Accepted Answer

A) shift the FE line to the right and leave the IS curve unchanged. 
B) shift the FE line to the left and shift the IS curve up and to the right. 
C) shift the FE line to the left and leave the IS curve unchanged. 
D) have no effect on the FE line. 
A) shift the FE line to the right and leave the IS curve unchanged. 
B) shift the FE line to the left and shift the IS curve up and to the right. 
C) shift the FE line to the left and leave the IS curve unchanged. 
D) have no effect on the FE line.

Question 18

An increase in investment spending would cause the FE line to

Accepted Answer

A) shift to the right. 
B) shift to the left. 
C) remain unchanged. 
D) remain unchanged if Ricardian equivalence holds; otherwise,shift to the right. 
A) shift to the right. 
B) shift to the left. 
C) remain unchanged. 
D) remain unchanged if Ricardian equivalence holds; otherwise,shift to the right.

Question 19

Analyze the following statement,and show what would happen in the long run if such advice were followed by the Fed: "The increase in the stock market has increased people's wealth.As a result,their consumption has increased,increasing aggregate demand and output.So the Fed needs to increase the money supply,since with higher income,people's demand for real money balances will be higher."

Accepted Answer

Assuming resources are fully utilized,th

Question 20

Keynesian economists believe that in the short run,

Accepted Answer

A) money neutrality exists and prices adjust rapidly. 
B) money neutrality does not exist and prices adjust rapidly. 
C) money neutrality exists and prices do not adjust rapidly. 
D) money neutrality does not exist and prices do not adjust rapidly. 
A) money neutrality exists and prices adjust rapidly. 
B) money neutrality does not exist and prices adjust rapidly. 
C) money neutrality exists and prices do not adjust rapidly. 
D) money neutrality does not exist and prices do not adjust rapidly.

An increase in expected inflation causes the real interest rate to and output to in the short run,before prices adjust to restore equilibrium.

You have just read that Australia has suffered a drought,destroying its wheat crop for this year.The effect of this adverse supply shock on Australia would probably be

In classical IS-LM analysis,the effects of a decline in desired investment include

A decrease in the money supply would cause the IS curve to and the LM curve to .

When the money supply declines by 10%,in the long run,output and the price level .

The LM curve

Banks decide to raise the interest rate they pay on checking accounts from 1% to 2%.This action would

The IS curve will shift down and to the left when

Suppose the intersection of the IS and LM curves is to the left of the FE line.What would most likely eliminate a disequilibrium among the asset,labor,and goods markets?

An increase in money supply causes the real interest rate to and output to in the short run,before prices adjust to restore equilibrium.

A temporary decrease in government purchases causes the real interest rate to and output to in the short run,before prices adjust to restore equilibrium.

Which of the following would shift the FE line to the left?

A decline in expected future output would cause the IS curve to

A decrease in wealth would cause the IS curve to

The short-run aggregate supply curve (in the absence of misperceptions)

Under monetary neutrality,an increase in the money supply causes output to and the price level to .

A temporary supply shock,such as a bumper crop,would

An increase in investment spending would cause the FE line to

Keynesian economists believe that in the short run,

Introduction to Macroeconomics

The Measurement and Structure of the National Economy

Productivity, Output, and Employment

Consumption, Saving, and Investment

Saving and Investment in the Open Economy

Long-Run Economic Growth

The Asset Market, Money, and Prices

Business Cycles

Classical Business Cycle Analysis

Keynesianism: The Macroeconomics of Wage and Price Rigidity

Unemployment and Inflation

Exchange Rates,Business Cycles,and Macroeconomic Policy in the Open Economy

Monetary Policy and the Federal Reserve System

Government Spending and Its Financing

Filters

Exam 9: The IS-LM/AD-AS Model

An increase in expected inflation causes the real interest rate to ________ and output to ________ in the short run,before prices adjust to restore equilibrium.

You have just read that Australia has suffered a drought,destroying its wheat crop for this year.The effect of this adverse supply shock on Australia would probably be

In classical IS-LM analysis,the effects of a decline in desired investment include

A decrease in the money supply would cause the IS curve to ________ and the LM curve to ________.

When the money supply declines by 10%,in the long run,output ________ and the price level ________.

The LM curve

Banks decide to raise the interest rate they pay on checking accounts from 1% to 2%.This action would

The IS curve will shift down and to the left when

Suppose the intersection of the IS and LM curves is to the left of the FE line.What would most likely eliminate a disequilibrium among the asset,labor,and goods markets?

An increase in money supply causes the real interest rate to ________ and output to ________ in the short run,before prices adjust to restore equilibrium.

A temporary decrease in government purchases causes the real interest rate to ________ and output to ________ in the short run,before prices adjust to restore equilibrium.

Which of the following would shift the FE line to the left?

A decline in expected future output would cause the IS curve to

A decrease in wealth would cause the IS curve to

The short-run aggregate supply curve (in the absence of misperceptions)

Under monetary neutrality,an increase in the money supply causes output to ________ and the price level to ________.

A temporary supply shock,such as a bumper crop,would

An increase in investment spending would cause the FE line to

Keynesian economists believe that in the short run,

Introduction to Macroeconomics

The Measurement and Structure of the National Economy

Productivity, Output, and Employment

Consumption, Saving, and Investment

Saving and Investment in the Open Economy

Long-Run Economic Growth

The Asset Market, Money, and Prices

Business Cycles

Classical Business Cycle Analysis

Keynesianism: The Macroeconomics of Wage and Price Rigidity

Unemployment and Inflation

Exchange Rates,Business Cycles,and Macroeconomic Policy in the Open Economy

Monetary Policy and the Federal Reserve System

Government Spending and Its Financing

Filters

An increase in expected inflation causes the real interest rate to and output to in the short run,before prices adjust to restore equilibrium.

A decrease in the money supply would cause the IS curve to and the LM curve to .

When the money supply declines by 10%,in the long run,output and the price level .

An increase in money supply causes the real interest rate to and output to in the short run,before prices adjust to restore equilibrium.

A temporary decrease in government purchases causes the real interest rate to and output to in the short run,before prices adjust to restore equilibrium.

Under monetary neutrality,an increase in the money supply causes output to and the price level to .