Question # 1

A change in the money supply has a greater effect upon equilibrium income.

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The more interest sensitive private sector spending is.

The less interest sensitive private sector spending is.

The smaller the expenditure multiplier is

The more interest sensitive money holdings are to the rate of interest.

Those who favor setting the target rate of inflation at about 3% believe.

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The cost of moderate inflation can be minimized by indexing the tax system and bonds

that the cost of going to 0% is very low

That moderate inflation increases money illusion

Believe that moderate inflation aggravates the time inconsistency problem

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

A checking deposit held at a commercial bank is considered ______ of that bank.

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An asset

Net worth

a liability

Capital

An example of nondiscretionary fiscal policy would be.

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The operation of the welfare state

A Federal jobs program adopted to stimulate consumption

A tax cut adopted to stimulate consumption

An interest rate cut implemented to stimulate consumption

Short run contractionary Fiscal policy would result in.

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Aggregate demand moving to the right

Aggregate supply moving to the right

Aggregate demand moving to the left

Aggregate supply moving to the left

In the Keynesian cross diagram, an 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

In the Keynesian corss diagra, an increase in autonomous consumer expenditure causes the aggregate demand function to shift up the equilibrium level of aggregate output to _______ and the IS curve to shift to the _______

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rise ; left

rise ; right

fall ; left

fall ; right

in the Keynesian cross diagram, a decrease in investment spending because companies become more pessimistic about investment profitability 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

an asset that can easily be exchanged for goods and services is called a.

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Financial asset

Barter like asset

Illegitimate asset

Liquid asset

A decline in the money__________ shifts the LM curve to the ____ causing the interest rate to rise and output to fall.

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Demand ; right

demand ; left

supply ; right

supply ; left

As a result of the increase in government expenditures disposable income increases by.

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Rs.10 billion

Rs.9 billion

Rs.20 billion

Rs.5 billion

When your grandmother keeps her savings hidden under her mattress she is using money as.

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a standard of deferred panyment

A comfortable thing for sleeping

A medium of exchange

A store of value

If the nominal money supply doubles while real money demand is unchanged what happens to the price level.

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The price level increases by a factor of four

The price level doubles

The price level is unchanged

The price level falls by one half.

As the interest sensitivity of money demand increases

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The multiplier term increases

Fiscal policy has a greater effect on output

Monetary policy has a smaller effect on output

All of the above

An increase in money _______ shifts the LM curve to the _____ causing the interest rate to fall and output to rise

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demand ; right

demand ; left

supply ; right

supply ; left

One of money's primary roles in the economy comes from the use of money to transfer purchasing power to the future This role of money is called.

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store of value

Unit of account

Medium of exchange

Standard of deferred payment

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

The quantity theory of money allows monetarists to obtain a number of economics predictions by assuming a constant.

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Velocity of money

Nominal output

Overall price level

Stock of money

The relation between M2 and inflation is tighter than the relation between M1 and inflation because.

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M1 is larger than M2

The demand for M2 is more stable

M1 includes more liquid assets the M2

None of the above answers is correct.

An increase in the rate of inflation which is not accompanied by any change in the volume of consumer goods sold will automatically increase the.

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Revenue from value added tax

Level of company profits

Level of unemployment

Average level of wages

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