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```ECON 3312
Quiz # 3
1. From an initial equilibrium, an increase in government expenditures will create:
a. excess supply of money.
b. excess demand for goods.
c. excess supply of goods.
d. excess demand for bonds.
e. None of the above.
2. From an initial equilibrium, an increase in autonomous consumption expenditures will create:
a. excess supply of money.
b. excess demand for money.
c. excess supply of goods.
d. excess demand for bonds.
e. None of the above.
3. From an initial equilibrium, an increase in money supply will create:
a. excess supply of money.
b. excess demand for goods.
c. excess demand for bonds.
d. All of the above.
e. None of the above.
4. The difference between the Classical money demand and the Keynesian money demand is?
a. Classical is correct.
b. Keynesian is correct.
c. Classical has no speculative component.
d. Keynesian has no transactions component.
e. There is no difference bewteen the two.
5. Assume that the economy can be represented by the following equations:
Consumption: C = 100 + 0.9(Y-T)
Investment:
I = 100 - 10r
Government: G = 100
Taxes:
T = 100
Money Demand: L = 100 + Y - 50r
Money Supply: M = 700
What is equilibrium r and Y?
a. r = 5 and Y = 500.
b. r = 6 and Y = 1100.
c. r = 7 and Y = 1500.
d. cannot be determined from information given.
e. None of the above. (r=10, Y =1100)
6. An increase in lump sum taxes will have what effect on equilibrium income and
equilibrium interest rates?
a. no effect.
b. increase both.
c. increase Y and decrease r.
d. decrease both.
e. increase r and decrease Y.
7. Which magnitude is larger?
a. the equilibrium multiplier.
b. the simple multiplier.
c. the MPC.
d. the MPS.
e. All are equal.
8. If money demand has just increased, which of the following events may have preceded
it?
a. Increase in taxes.
b. Increase in demand for bonds.
c. Decrease in autonomous investment.
d. Increase in autonomous investment.
e. None of the above.
9. If both the money market and the goods market are in equilibrium, then the bond market
must also be in equilibrium because of:
a. Say's Law.
b. Quantity Theory.
c. Pigou effect.
d. Keynes effect.
e. Walras Law.
10. An increase in the supply of bonds could be caused by which of the following?
a. Increase in money supply.
b. Decrease in government spending.
c. Decrease in money demand.
d. Decrease in money supply.
e. All of the above.
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