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29 Cards in this Set
- Front
- Back
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A change in the interest rate will generally affect the
a) level of investment b) the amount of money people want to hold c) level of consumption d) all of these |
d) all of these
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As income and production rise, the demand for real money balances will _____ and interest rates will _______.
a) rise; rise b) fall; rise c) fall; fall d) rise; fall |
a) rise; rise
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The three functions of money are
a) store of value, unit of account, to regulate the economy b) store of value, unit of account, bank settlement c) store of value, unit of account, medium of exchange d) store of value, medium of exchange, payment specie |
c) store of value, unit of account, medium of exchange
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In the IS-LM model, equilibrium income can be affected by
a) monetary policy alone b) fiscal policy alone c) both fiscal and monetary policy d) neither monetary nor fiscal policy |
c) both fiscal and monetary policy
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In the IS-LM diagram, we are in "general equilibrium"
a) at all points on the LM curve b) only at the intersection of the IS and LM curves c) at all points d) at all points on the IS curve |
b) only at the intersection of the IS and LM curves
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In the figure above, the money market is in equilibrium
a) only at point E (equilibrium) b) at points B, C, and E (LM) c) at points A and E (IS) d) at points E and D e) at points A,B,E, and C (IS and LM) |
b) at points B,C, and E
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From an initial IS-LM equilibrium with normally-sloped IS and LM curves, the money supply falls. At the new IS-LM equilibrium we have some combination of a __________ income and a ___________ interest rate.
a) lower; higher b) higher; lower c) lower, lower d) higher; higher |
a) lower, higher
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In the figure above, with IS0 shifting to IS1 against the upward-sloping LM curve, crowding-out is the result that
a) income rises to Y1 instead of Y2 b) income stays at YO3 c) income rises to Y1 instead of staying at YO3 d) income rises to Y2 instead of Y1 |
d) income rises to Y2 instead of to Y1
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An increase in the real money supply will have its maximum effect on the equilibrium level of GDP when the
a) LM curve is horizontal b) LM curve is vertical c) IS curve is negatively sloped d) IS curve is vertical |
b) LM curve is vertical
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If the Fed's goal is to keep the interest rate fixed, a contractionary fiscal policy must be accompanied by ___________ monetary policy that shifts the LM curve to the __________.
a) a contractionary, left b) a contractionary, right c) an expansionary, right d) an expansionary, left |
a) a contractionary, left
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An increase in the nominal money supply will shift
a) SAS down and lower the price level b) AD down and lower the price level c) AD up and raise the price level d) SAS up and raise the price level |
c) AD up and raise the price level
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If, other things constant, the actual real wage is below the equilibrium real wage, the short-run aggregate supply curve in the next period would
a) be vertical and the price level would increase b) shift upward and the price level would increase c) shift downward and the price level would fall d) be unaffected and the price level would remain constant |
b) shift upward and the price level would increase
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A fiscal expansion will
a) reduce both the price level and the real income in the short run b) raise both the price level and real income in the long run c) raise both the price level and real income in the short run d) raise real income but leave the price level unaffected in the long run |
c) raise both the price level and real income in the short run
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If the productivity of labor were suddenly to increase, we would expect to observe
a) an increase in the natural level of real GDP b) a short-run rise in output and fall in prices c) a downward shift in the aggregate supply curve d) all of the above are correct |
d) all of the above are correct
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A single aggregate demand curve records how IS-LM equilibrium output changes as __________ changes.
a) the price level b) the IS curve c) the nominal money supply d) government expenditure |
a) the price level
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Suppose the aggregate demand curve shifts rightward against a horizontal short-run aggregate supply curve. Real GDP would _______ while the price level _________.
a) rise, remain unchanged b) remain unchanged, falls c) fall, rises d) rise, rises e) remain unchanged, rises |
a) rise, remains unchanged
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When the price firm's receive for their output rises, the resulting _________ in the real wage rate leads firms to profitably employ __________ labor than before, thus _________ the amount of output willingly supplied.
a) fall, more, raising b) rise, more, raising c) rise, less, lower d) fall, less, raising |
a) fall, more, raising
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What is held constant at all points along a single SAS curve?
a) the amount of labor employed b) the real wage rate c) the nominal wage rate d) real GDP e) the price level |
c) the nominal wage rate
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From an initial AD/SAS/LAS intersection, a fiscal stimulus with no initial change in the nominal wage causes output to __________ while the price level ___________.
a) rises, rises b) remains constant, rises c) remains constant, falls d) fall, rises e) rise, remains constant |
a) rises, rises
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The three ways of reducing a government budget deficit are to:
a) decrease government spending, reduce consumption, increase the tax rate b) decrease government spending, increase real income, reduce the tax rate c) increase government spending, decrease real income, reduce the tax rate d) decrease government spending, increase real income, increase the tax rate |
d) decrease government spending, increase real income, increase the tax rate
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The cyclical deficit is:
a) what the budget deficit would be if the economy were operating at the natural real GDP level b) the amount by which the actual government budget deficit exceeds the structural deficit c) the amount by which structural deficit exceeds the actual budget deficit d) the same as the structural deficit |
b) the amount by which the actual government budget deficit exceeds the structural deficit
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A government budget surplus:
a) increases a country's ability to finance domestic and foreign investment b) increases a country's ability to finance domestic investment and decrease its ability to finance foreign investment c) decreases a country's ability to finance domestic investment and increases its ability to finance foreign investment d) decreases a country's ability to finance domestic and foreign investment |
a) increases a country's ability to finance domestic and foreign investment
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Suppose we have an economy for which G=1100, T=800, S=230, and I=230. If I falls to 150, the economy's trade deficit
a) increases from 0 to 80 b) increases from 0 to 70 c) decreases from 300 to 220 d) decreases from 70 to -10 e) decreases from 0 to -80 |
c) decreases from 300 to 220
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In a small open economy, the real interest rate will always be:
a) equal to the world real interest rate b) below the world real interest rate c) independent of the world real interest rate d) above the world real interest rate |
a) equal to the world real interest rate
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Suppose that a computer memory chip costs 600 yen in Japan and $3 in the United States and that the exchange rate was 250 yen/$. In this situation, traders would __________ increasing the ____________ and causing the dollar to ____________.
a) buy chips in United States; demand for $; strengthen b) buy chips in United States; demand for yen; weaken c) buy chips in Japan; supply of $; weaken d) buy chips in Japan; demand for yen; strengthen |
c) buy chips in Japan; supply of $; weaken
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A stronger dollar implies that foreigners will find U.S. exports _______ and U.S. citizens will find imports __________.
a) less expensive; less expensive b) less expensive; more expensive c) more expensive; more expensive d) more expensive; less expensive |
d) more expensive; less expensive
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When foreign securities become more attractive to U.S. investors,
a) there is an outflow of dollars from the United States and the dollar depreciates b) imports into the United States will increase c) the foreign currencies depreciate relative to the dollar d) there is an outflow of dollars from the United States and the dollar appreciates |
a) there is an outflow of dollars from the United States and the dollar depreciates
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Suppose that you travel from the United States to Japan this summer and the dollar has appreciated relative to the yen. Your total trip costs, assuming you buy the exact same goods and services, will:
a) fall in dollar terms b) stay the same in terms of dollars c) rise in dollar terms d) stay the same in terms of yen and dollars expended |
a) fall in dollar terms
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Monetary policy is more powerful than fiscal policy under _________ exchange rates due to the amplifying effect from changes in interest rates to exchange rates to ___________.
a) flexible, net exports b) flexible, monetary accommodation c) fixed, net exports d) fixed, monetary accommodation |
a) flexible, net exports
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