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Quiz 4

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Question 1 (1.0 points)
Which of the following best defines the LM curve?
  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
Question 2 (1.0 points)
A reduction in government spending will cause:
  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.
Question 3 (1.0 points)
A reasonable dynamic assumption for the IS-LM model is that:
  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.
Question 4 (1.0 points)
If the demand for money is very sensitive to the interest rate, then:
  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.
Question 5 (1.0 points)
A reduction in government spending will cause:
  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.
Question 6 (1.0 points)
Suppose the economy is operating on the LM curve but not on the IS curve. Given this information, we know that:
  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.
Question 7 (1.0 points)
Which of the following describes the policy mix of post-unification Germany?
  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
Question 8 (1.0 points)
Which of the following best describes the Clinton-Greenspan policy mix?
  1. expansionary monetary, expansionary fiscal
  2. expansionary monetary, contractionary fiscal
  3. contractionary monetary, expansionary fiscal
  4. contractionary monetary, contractionary fiscal
Question 9 (1.0 points)
The "real money supply" is:
  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.
Question 10 (1.0 points)
The IS represents:
  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
Question 11 (1.0 points)
Based on our understanding of the IS-LM model, we know with certainty that the policy mix of Clinton-Greenspan would have resulted in:
  1. a reduction in the interest rate.
  2. an increase in output.
  3. an increase in the interest rate.
  4. a reduction in output.
Question 12 (1.0 points)
A Fed purchase of securities will most likely have which of the following effects?
  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
Question 13 (1.0 points)
Assume that investment does NOT depend on the interest rate. A reduction in government spending will cause which of the following for this economy?
  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
Question 14 (1.0 points)
The IS curve will NOT shift when which of the following occurs?
  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
Question 15 (1.0 points)
Which of the following best defines the IS curve?
  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
Question 16 (1.0 points)
Based on our understanding of the IS-LM model that takes into account dynamics, we know that a reduction in the money supply will cause:
  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
Question 17 (1.0 points)
Suppose there is a simultaneous tax cut and open market sale of bonds. Which of the following must occur as a result of this?
  1. Output increases.
  2. Output decreases.
  3. Both output and the interest rate increase.
  4. The interest rate decreases.
  5. The interest rate increases.
Question 18 (1.0 points)
Which of the following occurs as the economy moves rightward along the LM curve?
  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.
Question 19 (1.0 points)
An increase in the aggregate price level, P, will most likely have which of the following effects?
  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
Question 20 (1.0 points)
The IS curve will shift when which of the following occurs?
  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
Question 21 (1.0 points)
Based on our understanding of the IS-LM model, we know that a tax cut:
  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.
Question 22 (1.0 points)
Based on our understanding of the IS-LM model that takes into account dynamics, we know that a reduction in government spending will cause:
  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.
Question 23 (1.0 points)
A reduction in the aggregate price level, P, will most likely have which of the following effects?
  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
Question 24 (1.0 points)
A tax cut must cause which of the following?
  1. a reduction in investment
  2. an increase in investment
  3. no change in investment
  4. none of the above
Question 25 (1.0 points)
Suppose the economy is operating on neither the IS nor LM curve. Given this information, we know that:
  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
Copyright 2008, by the Contributing Authors. Cite/attribute Resource . admin. (2009, January 27). Quiz 4. Retrieved January 07, 2011, from Free Online Course Materials — USU OpenCourseWare Web site: http://ocw.usu.edu/economics/macroeconomics-for-managers/quiz4.htm. This work is licensed under a Creative Commons License Creative Commons License