Download Sample quiz 5

Quiz 5
(1) The IS-LM model takes:
a.
b.
c.
d.
National income as exogenous
The price level as exogenous
The interest rate as exogenous
National income and the price level as exogenous
(2) In the Keynesian-cross model, actual expenditure equals:
a.
b.
c.
d.
GDP
The money supply
The supply of real balances
Both (b) and (c)
(3) According to the analysis underlying the Keynesian cross, when planned
expenditure exceeds income:
a.
b.
c.
d.
Income falls
Planned expenditure falls
Unplanned inventory investment is negative
Prices rise
(4) The government-purchases multiplier indicates effects of $1 change in
government purchases on change in:
a.
b.
c.
d.
Budget deficit
Consumption
Income
Interest rate
(5) According to the Keynesian-cross analysis, if MPC stands for marginal
propensity to consume, then a rise in taxes of T will:
a.
b.
c.
d.
Decrease equilibrium income by T
Decrease equilibrium income by T /(1  MPC )
Decrease equilibrium income by (T )( MPC ) /(1  MPC )
Not affect equilibrium income at all
(6) In the Keynesian-cross model, if government purchases increase by 250, then the
equilibrium level of income:
a. Increases by 250
b. Increases by more than 250
c. Decreases by 250
d. Increases, but by less than 250
(7) IS curve shows possible combinations of interest rate and income which
equilibrates the market of :
a.
b.
c.
d.
Goods and services
Money market
Labor market
Import market
(8) The IS curve shifts when all of the following economic variable change except:
a.
b.
c.
d.
The interest rate
Government spending
Tax rates
Marginal propensity to income
(9) If consumer confidence increases, the IS curve will:
a.
b.
c.
d.
Shift to the left
Shift to the right
Shift in either direction
Not shift
(10) When LM curve is drawn, the quantity that is help fixed is:
a.
b.
c.
d.
The nominal money supply
The real money supply
Government spending
The tax rate
(11) In the theory of money demand, households and firms have an incentive to
convert money into bonds when:
a.
b.
c.
d.
Nominal interest rate goes up
Nominal interest rate goes down
Government spending decreases
The tax rate increases
(12) The theory of liquidity preference implies that, other things being equal, an
increase in the real money supply will:
a. Lower the interest rate
b. Raise the interest rate
c. Have no effect on the interest rate
d. Either lower or raise the interest rate
(13) The effect of tax-cut in the IS-LM model will be :
a.
b.
c.
d.
Interest rate rises and income falls
Interest rate falls and income rises
Interest rate falls and income falls
Interest rate rises and income rises
(14) The LM curve, in the usual case:
a.
b.
c.
d.
Is vertical
Is horizontal
Slopes down to the right
Slopes up to the right
(15) In the IS-LM model under the usual conditions in a closed economy, an increase
in government spending increases the interest rate and crowds out:
a.
b.
c.
d.
Prices
Investment
Money supply
Taxes