Multiple Choice 2014 - HANI PDF

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In the Keynesian model with a variable money wage and variable price level, an increase in the money supply lead to a rise in all of the following except a. price level. b. output. c. real wage. d. level of employment. e. all of these rise In the Keynesian view, a. both monetary and fiscal policy ca...

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1. In the Keynesian model with a variable money wage and variable price level, an increase in the money supply lead to a rise in all of the following except a. price level. b. output. c. real wage. d. level of employment. e. all of these rise 2. In the Keynesian view, a. both monetary and fiscal policy can affect income. b. monetary policy can be ineffective when money demand is less interest rate elastic. c. fiscal policy is a more reliable way to stimulate output during a recession. d. all of the above 3. In the IS-LM model, if interest rates rise while output falls the a. money supply must have fallen. b. price level must have fallen. c. money supply must have risen. d. level of government spending must have fallen. e. none of the above. 4. In the liquidity trap case where the LM schedule is nearly horizontal, a. both monetary and fiscal policy are highly effective. b. monetary and fiscal policy are ineffective. c. monetary policy is ineffective and fiscal policy is effective. d. fiscal policy is ineffective and monetary policy is effective. 5. The higher the interest sensitivity of investment, the a. less effective is monetary policy and the more effective is fiscal policy. d. more effective are both monetary and fiscal policies. c. less effective are both monetary and fiscal policies. d. less effective is fiscal policy and the more effective is monetary policy. 6. If interest rates and output rises, then a. government spending may have fallen. b. the money supply may have risen. c. taxes may have risen. d. expectations may have risen. e. none of the above. 7. Assume the marginal propensity to consume is .8. To offset a fall in income of 1,000, the government should a. increase taxes by $200. b. raise taxes by $250. c. increase government spending and taxes by 1,000. d. cut taxes by $200. e. both c and d. 8. A simultaneous reduction in both taxes and the money stock will always a. increase interest rates. b. lower income and raise the interest rate. c. lower income and raise the interest rate. d. increase income. e. raise income and raise the interest rate.

9. In the case where money demand is completely interest insensitive (interest elasticity equals zero), an increase in the quantity of money will a. increase income but leave the interest rate unchanged. b. increase income and lower the interest rate. c. lower the interest rate but leave income unchanged. d. leave both income and the interest rate unchanged. 10. The IS curve shifts when all of the following variables change except a. tax rates. b. interest rates. c. government spending. d. the marginal propensity to consume. e. both b and d. 11. Within the IS-LM curve model, an increase in government spending financed by printing money will always a. have no impact on income. b. lower income and raise the interest rate. c. increase the interest rate. d. lower the interest rate and increase income. e. increase income. 12. Within the IS-LM curve model, a decline in expectations would a. lower income and the interest rate. b. increase income and lower the interest rate. c. lower income, but leave the interest rate unchanged. d. lower the interest rate, but leave income unchanged. e. lower income and increase the interest rate. 13. Within the IS-LM curve model, if the government cut taxes at the same time that there was an autonomous increase in investment demand, then a. income would rise and the interest rate would fall. b. income and the interest rate would rise. c. income would rise but the effect on the interest rate is uncertain. d. the interest rate would rise but the effect on income is uncertain. e. the effects on both income and the interest rate are uncertain. 14. An increase in the money stock has no effect on equilibrium income whenever the a. IS curve is horizontal. b. IS curve is vertical. c. LM curve is vertical. d. LM curve is horizontal. 15. In the closed economy IS-LM model, an increase in government spending crowds-out a. prices. b. the money supply. c. consumption. d. investment. e. both c and d. 16. An decrease in the velocity of money will shift the a. IS curve up. b. LM curve up. c. LM curve down. d. IS curve down.

17. Assume that there is an increase in perceived bankruptcy risk. As a result of this we would expect to see a. income and interest rates to rise. b. money demand and interest rates to fall. c. money demand and interest rates to rise. d. money supply to rise and interest rates to fall.

Figure 1

18. By referring to Figure 1, an increase in the money stock a. shifts the LM schedule to the right from LM0 to LM1. b. shifts the LM schedule to the left from LM0 to LM2. c. leaves the LM curve unchanged at LM0. d. shifts neither the IS nor the LM schedule. 19. According to Figure 1, a decrease in the money stock a. lowers the interest rate to r 1. b. raises the interest rate to r 2. c. leaves the interest rate at r 0. d. None of the above 20. Changes in all of the following shift the LM curve except a. the price level. b. income. c. the money supply. d. money demand. e. all of the above shift LM curve.

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ANSWER C D A C D D C A B B E A B B D B C A B B...