Question # 1

Factor that cause the IS curve to shift include.

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Change in autocoups consumer spending

Change in taxes

Change in government spending

All of the above

According to the supply side model a reduction in the tax rate.

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Could reduce the size of any budget deficit

Would have no effect on output

Would have no effect on consumption

None of the above

A decline in planned investment spending unrelated to the interest rate focuses the equilibrium level of aggregate output to ________ and shifts the _ curve to the _______

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rise; Lm ; RIGHT

RISE ; is; right

fall ; IS; Left

rise ; LM; left

The quantity of money demanded varies.

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Directly with both prices and output

Inversely with both prices and output

Directly with prices and inversely with output

Inversely with prices and directly with output

Why would corporations want to achieve zero balances in their checking accounts.

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To earn more interest

To avoid paying taxes

to keep a low profile

To circumvent banking regulations

A decrease iin money demand other thing equal shifts the _____ curve to the

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IS ; right

Is ; Left

LM ; Left

LM ; Rfight

Suppose velocity is constant and the real income elasticity of the demand for money is less than one then estimating inflation as money growth rate minus real growth rate.

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Overestimates inflation

Underestimates inflation

Is an erratic estimate of inflation

Remain an accurate estimate of inflation.

The equilibrium level of saving is.

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Rs.120

Rs.75

Rs.40

Rs.80

In the Keynesian cross diagram, a decline in autonomous consumer expenditure causes the aggregate demand function to shift ______ and the equilibrium level of aggregate output to.

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up ; rise

up ; fall

down ; rise

down ; fall

What's the most common way for a central bank to reduce the money supply.

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Collect higher taxes

Sell bonds to the public

Buy bounds from the government

Buy bonds from the public

Which of the following measures is the best measure of money as a medium of exchange.

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M1

M2

M3

None of the above

Automatic stabilizers

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Counter balance fluctuations in economic activity.

Reinforce fluctuations in economic activity

Do not occur when the economy falls into recession

Reduces the size of the deflationary gap

In the Keynesian corss diagram, and cline in autonomous consumer expenditure causes the aggregate demand function to shift _____ the equilibrium level of aggregate output to fall, and the IS curve to shift to the.

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up ; left

up ; right

down ; left

down ; right

Tax incidence is the

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Ultimate distribution of a tax's burden

Measure of the inpat the tax has on employment and output

Behavior of shifting the tax to another party

Structure of the tax

An increase in expected inflation is likely ot cause.

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A decline in the demand for real balances

an increase in the demand for real balances.

No change i the demand for real balances

No change in the demand for real balances only of the income elasticity of real money demand is zero.

A tax increase __________ disposable income ____ consumption expenditure and shifts the IS curve to the.

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Increase; increases ; right

Increase ; decreases ; left

decreases ; increases ; left

decreases ; decreases ; left

Increasing the government budget deficit.

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Increases output in the long run

Decreases output in the short run

Decreases output in the long run.

Decreases the interest rate in the medium run.

What happens to the money supply if the deficit is financed by selling bonds to the central bank.

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The money supply increases

The money supply decreases

The money supply is unaffected

We cannot tell what will happen to the money supply

A bank has excess liquidity reserves to lend but is unable to find a willing borrower these will_______ the size of the money multiplier.

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Reduce

Increase

Have no effect on

Double

"Rising productivity does not in itself spell the end of inflation. With enough______ it would still be possible to whip prices into a froth the blank is best filled with.

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Income growth

Unemployment

Money growth

Taxes

The intersection of the IS and LM curves captures.

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The equilibrium of the demand and supply sides of the economy

the equivalence of monetary and fiscal policy

Joint equilibrium in the goods and money markets

All of the above

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