1. A fiscal expansion coupled with a monetary expansion must always cause a) Output to rise b) Output to fall c) Interest rates to rise d) Interest rates to fall 2. Autonomous consumption is a) a function of disposable income b) a function of national income c) a function of GDP d) a function of saving e) independent of the level of income 3. Monetary policy loses its effectiveness in all of the following situations EXCEPT a. When the IS curve is vertical. b. When the LM curve is nearly horizontal. c. When interest rate controlled by the Fed reaches zero. d. When the IS curve is horizontal. 4. In a small open economy, if the government adopts a policy that lowers imports, then that policy: a) raises the real exchange rate and increases net exports. b) raises the real exchange rate and does not change net exports c) raises the real exchange and decreases net exports d) lowers the real exchange rate 5. An increase in the trade surplus of the a small open economy could be the result of a. a domestic tax cut. b. an increase in government spending. c. an increase in the world interest rate. d. the implementation of an investment tax-credit provision. Internal Use 6.) Disposable income equals a. Income minus saving b. Income minus saving and taxes c. Consumption minus taxes d. The sum of savings and consumption 7.) Assume the consumption function is given by ? = ?0 + ?1?. For the equation the Keynesians assume, ?1 is a. Negative b. Larger than ?0 c. Different at different levels of income d. None of the above 8.) If the money demand function is not responsive to interest rate, the LM curve is a. Vertical b. Horizontal c. Upward slopping d. None of the above 9.). The IS curve represents a. the single level of output where the goods market is in equilibrium. b. the single level of output where financial markets are in equilibrium. c. the combinations of output and the interest rate where the money market is in equilibrium. d. the combinations of output and the interest rate where the goods market is in equilibrium. 10.) For each interest rate, the LM curve illustrates the level of output where a. the goods market is in equilibrium. b. inventory investment equals zero. c. money supply equals money demand. d. all of the above 11.) The implication of the life cycle hypothesis is that in the short run a. The APC is equal to the MPC b. APC is greater than MPC c. APC is less than MPC d. None of the above 12.) Which three of the following are characteristic of Friedman’s ‘Permanent Income Hypothesis’? a. The main influence on long-run consumption is ‘transitory income’ b. The main influence on long-run consumption is some form of long-run average income c. The long-run consumption function will tend to be steeper than the short-run consumption function d. The long-run consumption function will tend to be flatter than the short-run consumption function Internal Use 13.) Which three of the following are characteristics of Modigliani’s ‘Life Cycle Hypothesis’? a. Consumption is seen as a constant proportion of long-run average (lifetime) income b. Consumers try to even out their consumption expenditures over a lifetime in which income fluctuates widely c. Consumers base their expenditure on the level of disposable income actually received at any point in their life cycle d. In youth and old age, when income is low, consumption is maintained by borrowing or by drawing on past savings respectively, so that consumption is a high proportion of income
1. A fiscal expansion coupled with a monetary expansion must always cause
a) Output to rise
b) Output to fall
c) Interest rates to rise
d) Interest rates to fall
2. Autonomous consumption is
a) a function of disposable income
b) a function of national income
c) a function of GDP
d) a function of saving
e) independent of the level of income
3.
a. When the IS curve is vertical.
b. When the LM curve is nearly horizontal.
c. When interest rate controlled by the Fed reaches zero.
d. When the IS curve is horizontal.
4. In a small open economy, if the government adopts a policy that lowers imports, then
that policy:
a) raises the real exchange rate and increases net exports.
b) raises the real exchange rate and does not change net exports
c) raises the real exchange and decreases net exports
d) lowers the real exchange rate
5. An increase in the trade surplus of the a small open economy could be the result of
a. a domestic tax cut.
b. an increase in government spending.
c. an increase in the world interest rate.
d. the implementation of an investment tax-credit provision.
Internal Use
6.) Disposable income equals
a. Income minus saving
b. Income minus saving and taxes
c. Consumption minus taxes
d. The sum of savings and consumption
7.) Assume the consumption function is given by ? = ?0 + ?1?. For the equation the
Keynesians assume, ?1 is
a. Negative
b. Larger than ?0
c. Different at different levels of income
d. None of the above
8.) If the money demand function is not responsive to interest rate, the LM curve is
a. Vertical
b. Horizontal
c. Upward slopping
d. None of the above
9.). The IS curve represents
a. the single level of output where the goods market is in equilibrium.
b. the single level of output where financial markets are in equilibrium.
c. the combinations of output and the interest rate where the
equilibrium.
d. the combinations of output and the interest rate where the goods market is in
equilibrium.
10.) For each interest rate, the LM curve illustrates the level of output where
a. the goods market is in equilibrium.
b. inventory investment equals zero.
c. money supply equals money demand.
d. all of the above
11.) The implication of the life cycle hypothesis is that in the short run
a. The APC is equal to the MPC
b. APC is greater than MPC
c. APC is less than MPC
d. None of the above
12.) Which three of the following are characteristic of Friedman’s ‘Permanent Income
Hypothesis’?
a. The main influence on long-run consumption is ‘transitory income’
b. The main influence on long-run consumption is some form of long-run average
income
c. The long-run consumption function will tend to be steeper than the short-run
consumption function
d. The long-run consumption function will tend to be flatter than the short-run
consumption function
Internal Use
13.) Which three of the following are characteristics of Modigliani’s ‘Life Cycle Hypothesis’?
a. Consumption is seen as a constant proportion of long-run average (lifetime)
income
b. Consumers try to even out their consumption expenditures over a lifetime in
which income fluctuates widely
c. Consumers base their expenditure on the level of disposable income actually
received at any point in their life cycle
d. In youth and old age, when income is low, consumption is maintained by
borrowing or by drawing on past savings respectively, so that consumption is a
high proportion of income
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