Concepts of Macroeconomics

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Quiz 4
Econ 430
Money & Banking
Spring 2012
Prof. Drescher

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Please place your answers for this section on the answer sheet for Quiz 2 template (see Course Content for the answer sheet).

1

An increase in autonomous consumer expenditure causes the equilibrium level of aggregate output to ________ at any given interest rate and shifts the ________ curve to the ________, everything else held constant. A) rise; LM; right

B) rise; IS; right
C) fall; LM; left
D) fall; IS; left

2
An autonomous depreciation of the U.S. dollar makes American goods ________ relative to foreign goods and results in a ________ in U.S. net exports, everything else held constant. A) cheaper; decline

B) cheaper; rise
C) more expensive; decline
D) more expensive; rise

3
If the Federal Reserve conducts open market purchases, the money supply ________, shifting the LM curve to the ________, everything else held constant. A) decreases; right
B) decreases; left
C) increases; right
D) increases; left

4
Everything else held constant, an expansionary ________ policy will cause the interest rate to rise, while an expansionary ________ policy will cause the interest rate to fall. A) monetary; monetary

B) monetary; fiscal
C) fiscal; monetary
D) fiscal; fiscal

5
The situation in which expansionary fiscal policy does not lead to a rise in aggregate output is referred to as ________. A) fiscal neutrality
B) a recession
C) complete crowding out
D) inflation

6
In the long-run ISLM model and with everything else held constant, as long as the level of output ________ the natural rate level, the price level will continue to ________, shifting the LM curve to the ________, until finally output is back at the natural rate level. A) exceeds; rise; right

B) exceeds; rise; left
C) remains below; fall; left
D) remains below; rise; right

7
Everything else held constant, a decrease in autonomous planned investment spending will cause the IS curve to shift to the ________ and aggregate demand will ________. A) right; increase
B) right; decrease
C) left; increase
D) left; decrease

8
By analyzing aggregate demand through its component parts, we can conclude that, everything else held constant, a decline in the price level causes A) a decline in the real money supply, an increase in interest rates, a decline in investment spending, and a decline in aggregate output demand. B) a decline in the real money supply, a decline in interest rates, an increase in investment spending, and an increase in aggregate output demand. C) an increase in the real money supply, a decline in interest rates, an increase in investment spending, and an increase in aggregate output demand. D) an increase in the real money supply, an increase in interest rates, a decline in investment spending, and a decline in aggregate output demand.

9
The short-run aggregate supply curve is upward sloping because in the short run, costs of many factors that go into producing goods and services are ________, meaning that the price for a unit of output will ________ relative to input prices and the profit per unit will rise. A) fixed; rise

B) fixed; fall
C) flexible; rise
D) flexible; fall

10
Suppose the economy is producing at the natural rate of output. An increase in consumer and business confidence will cause ________ in real GDP in the long run and ________ in the aggregate price level in the long run, everything else held constant. A) an increase; an increase……….??

B) a decrease; a decrease
C) no change; an increase
D) no change; a decrease

11
Suppose the economy is producing below the natural rate of output and the government is suffering from large budget deficits. To deal with the deficit problem, suppose the government takes a policy action to reduce the size of the deficits. This policy action will cause ________ in the unemployment...
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