111.If money demand does not depend on income, then the ______ curve is ______. A)IS; vertical B)IS; horizontal C)LM; vertical D)LM; horizontal
111.If money
A)IS; vertical
B)IS; horizontal
C)LM; vertical
D)LM; horizontal
112.If money demand is extremely sensitive to the interest rate, then the ______ curve is ______.
A)IS; vertical
B)IS; horizontal
C)LM; vertical
D)LM; horizontal
113.If the government wants to raise investment but keep output constant, it should:
A)adopt a loose
B)adopt a loose monetary policy and a loose fiscal policy.
C)adopt a loose monetary policy and a tight fiscal policy.
D)keep monetary policy unchanged but adopt a tight fiscal policy.
114.A tax cut combined with tight money, as was the case in the United States in the early 1980s, should lead to a:
A)rise in the real interest rate and a fall in investment.
B)fall in the real interest rate and a rise in investment.
C)rise in both the real interest rate and investment.
D)fall in both the real interest rate and investment.
115.An increase in the money supply:
A)increases income and lowers the interest rate in both the short and long runs.
B)increases income in both the short and long runs, but leaves the interest rate unchanged in the long run.
C)lowers the interest rate in both the short and long runs, but leaves income unchanged in the long run.
D)lowers the interest rate and increases income in the short run, but leaves both unchanged in the long run.
116.An increase in government spending raises income:
A)and the interest rate in the short run, but leaves both unchanged in the long run.
B)in the short run, but leaves it unchanged in the long run, while lowering investment.
C)in the short run, but leaves it unchanged in the long run, while lowering consumption.
D)and the interest rate in both the short and long runs.
117.An increase in taxes lowers income:
A)and the interest rate in the short run, but leaves both unchanged in the long run.
B)in the short run, but leaves it unchanged in the long run, while increasing consumption and lowering investment.
C)in the short run, but leaves it unchanged in the long run, while lowering consumption and increasing investment.
D)and the interest rate in both the short and long runs.
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