Factors that shift the IS curve involve: A) interest rates and levels of GDP. B) the quantity of money and the demand for money. C) the trade balance. D) exogenous variables affecting demand, such as a change in government spending or a change in the exchange rate.
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1. 1. |
Factors that shift the IS curve involve: |
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A) |
interest rates and levels of |
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B) |
the quantity of money and the demand for money. |
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C) |
the trade balance. |
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D) |
exogenous variables affecting demand, such as a change in government spending or a change in the exchange rate. |
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2. |
The LM curve shows that, with a fixed supply of money, as GDP rises, the demand for money will ____ and the rate of interest will ____. |
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A) |
rise; rise |
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B) |
fall; fall |
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C) |
rise; fall |
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D) |
fall; rise |
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3. |
If the supply of money increases, what happens in the IS–LM framework? |
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A) |
The IS curve shifts right. |
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B) |
The LM curve shifts right. |
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C) |
The IS curve shifts left. |
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D) |
The LM curve shifts left. |
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4. |
If the demand for money increases, what happens in the IS–LM framework? |
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A) |
The IS curve shifts right. |
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B) |
The LM curve shifts right. |
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C) |
The IS curve shifts left. |
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D) |
The LM curve shifts left. |
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5. |
Unlike in the long-run model, in the short-run Keynesian model, we make two critical assumptions: that firms adjust production depending on _______, and that _______. |
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A) |
total demand; prices are fixed |
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B) |
resource limitations; prices are flexible |
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C) |
the market rate of interest; consumers maximize utility |
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D) |
consumer spending; there is full employment |
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6. |
An increase in income in an open economy nation will cause a change in consumer spending on home production, and a(n): |
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A) |
increase in taxes. |
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B) |
decrease in savings. |
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C) |
increase in foreign production. |
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D) |
increase in imports if MPCF (marginal propensity to consume foreign goods) is greater than zero. |
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7. |
The greater the MPC is, the ______ the slope of the demand curve. |
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A) |
greater |
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B) |
smaller |
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C) |
It depends on the trade balance. |
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D) |
The slope of the demand curve does not depend on this. |
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8. |
Along the IS curve, which of the following markets are in equilibrium? |
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A) |
the money and forex markets |
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B) |
the goods and forex markets |
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C) |
the goods and |
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D) |
the goods, money, and forex markets |
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9. |
If the United States cuts its government budget deficit, what impact would there be on the IS curve? |
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A) |
It would shift right due to higher levels of total spending. |
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B) |
It would shift left due to lower levels of total spending. |
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C) |
It would shift left because of lower levels of total spending, and it would shift right if U.S. interest rates decline due to lower borrowing. |
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D) |
It would shift left because of higher nominal and real interest rates due to increased borrowing. |
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10. |
The open-economy IS curve slopes down because any change in the foreign or home interest rate will inversely affect demand, along with a secondary effect from a change in: |
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A) |
the rate of depreciation of assets. |
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B) |
the exchange rate and the trade balance. |
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C) |
the real interest rate. |
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D) |
the growth rate of money. |
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