Quiz 4

1. illustrates the effects of changes in i on desired money holdings by individuals
2. the combinations of i and Y that maintain equilibrium in financial markets
3. illustrates the effects of changes in i on investment
4. the combinations of i and Y that maintain equilibrium in the goods market

1. the IS curve to shift rightward, and the LM curve to shift up.
2. the IS curve to shift leftward.
3. the IS curve to shift rightward.
4. the LM curve to shift up.
5. the LM curve to shift down.

1. adjustment to the new IS-LM equilibrium is instantaneous after an LM shift, but not after an IS shift.
2. the economy is always on the IS curve, but moves only slowly to the LM curve.
3. the economy is always on both the IS and LM curves.
4. the economy is always on the LM curve, but moves only slowly to the IS curve.
5. the money market is quick to adjust, but the bond market adjusts more slowly.

1. the IS curve should be relatively flat.
2. the LM curve should be relatively steep.
3. the IS curve should be relatively steep.
4. neither the IS nor the LM curve will be affected.
5. the LM curve should be relatively flat.

1. a leftward shift in the IS curve.
2. a downward shift in the LM curve.
3. an upward shift in the LM curve.
4. a rightward shift in the IS curve.

1. the money market and bond markets are in equilibrium and the goods market is not in equilibrium.
2. neither the money, bond, nor goods markets are in equilibrium.
3. the goods market is in equilibrium and the money market is not in equilibrium.
4. the money market and goods market are in equilibrium and the bond market is not in equilibrium.
5. the money, bond and goods markets are all in equilibrium.

1. contractionary fiscal, expansionary monetary
2. contractionary fiscal, contractionary monetary
3. expansionary fiscal, contractionary monetary
4. expansionary fiscal, expansionary monetary
5. none of the above

1. expansionary monetary, expansionary fiscal
2. expansionary monetary, contractionary fiscal
3. contractionary monetary, expansionary fiscal
4. contractionary monetary, contractionary fiscal

1. the stock of money measured in terms of goods, not dollars.
2. the money supply after subtracting counterfeit bills.
3. the stock of high powered money only.
4. currency in circulation only.
5. the actual quantity of money, rather than the officially reported quantity.

1. the single level of output where financial markets are in equilibrium.
2. the single level of output where the goods market is in equilibrium.
3. the combinations of output and the interest rate where the goods market is in equilibrium.
4. the combinations of output and the interest rate where the money market is in equilibrium.
5. none of the above

1. a reduction in the interest rate.
2. an increase in output.
3. an increase in the interest rate.
4. a reduction in output.

1. a leftward shift in the IS curve
2. a downward shift in the LM curve
3. an upward shift in the LM curve
4. a rightward shift in the IS curve

1. no change in investment
2. an increase in investment
3. no change in the interest rate
4. no change in output
5. none of the above

1. a reduction in the interest rate
2. a reduction in government spending
3. a reduction in consumer confidence
4. all of the above
5. none of the above

1. illustrates the effects of changes in i on investment
2. the combinations of i and Y that maintain equilibrium in financial markets
3. the combinations of i and Y that maintain equilibrium in the goods market
4. illustrates the effects of changes in i on desired money holdings by individuals

1. an immediate increase in i and no initial change in Y.
2. an immediate drop in Y and immediate increase in i.
3. a gradual increase in i and gradual reduction in Y.
4. none of the above

1. Output increases.
2. Output decreases.
3. Both output and the interest rate increase.
4. The interest rate decreases.
5. The interest rate increases.

1. An increase in output causes an increase in money demand.
2. A reduction in the interest rate causes investment spending to increase.
3. A reduction in the interest rate causes an increase in the money supply.
4. A reduction in the interest rate causes money demand to increase.
5. An increase in output causes an increase in demand for goods.

1. a leftward shift in the IS curve
2. a rightward shift in the IS curve
3. an upward shift in the LM curve
4. a downward shift in the LM curve

1. a reduction in consumer confidence
2. an increase in taxes
3. a reduction in government spending
4. all of the above
5. none of the above

1. may cause investment spending to increase or decrease.
2. must cause investment spending to decrease.
3. a reduction in money demand and a reduction in the interest rate.
4. must cause investment spending to increase.
5. will cause no change in investment spending.

1. an immediate reduction in i and no initial change in Y.
2. a gradual reduction in i and an immediate reduction in Y.
3. a gradual reduction in i and gradual reduction in Y.
4. an immediate drop in Y and immediate increase in i.

1. a rightward shift in the IS curve
2. a leftward shift in the IS curve
3. a downward shift in the LM curve
4. an upward shift in the LM curve

1. a reduction in investment
2. an increase in investment
3. no change in investment
4. none of the above

1. the goods market is not in equilibrium.
2. financial markets are not in equilibrium.
3. the money market is not in equilibrium.
4. the bond market is not in equilibrium.
5. all of the above