2123 15s PS2
ECON 2123: Macroeconomics
Problem Set 2
Instructor: Yao Li
Problem Set 2
Macroeconomics, ECON 2123
(Instructor: Yao LI; TA: Astor FOK)
-----------------------------------------------------------------------------------------------------------------------------------[Pay attention to the deadline announced via LMES system]
100 marks total
Part I: Multiple Choice Questions. Choose the best answer. (10 marks, 2 marks each)
1. The money demand curve will shift to the left when which of the following occurs?
a. a reduction in the interest rate
b.
an increase in the interest rate
c.
an open market sale of bonds by the central bank
d.
an increase in income
e.
none of the above
2. At the current interest rate, suppose the supply of money is less than the demand for money. Given this information, we know that:
a. the price of bonds will tend increase.
b. the price of bonds will tend to fall.
c. production equals demand.
d. the goods market is also in equilibrium.
e. the supply of bonds also equals the demand for bonds.
3. The LM curve shifts down (or, equivalently, to the right) when which of the following occurs?
a. an increase in taxes.
b. an increase in output.
c. an open market sale of bonds by the central bank.
d. an increase in consumer confidence.
e. none of the above.
4. Suppose policy makers decide to reduce taxes. This fiscal policy action will cause which of the following to occur? a. the LM curve shifts and the economy moves along the IS curve.
b. the IS curve shifts and the economy moves along the LM curve.
c. both the IS and LM curves shift.
d. neither the IS nor the LM curve shifts.
e. output will change causing a change in money demand and a shift of the LM curve.
1
ECON 2123: Macroeconomics
Problem Set 2
Instructor: Yao Li
5. For this question, assume that investment spending depends only on the interest rate and no longer depends on output. Given this information, a reduction in the money supply
a. will cause investment to decrease.
b.
Problem Set 2
Instructor: Yao Li
Problem Set 2
Macroeconomics, ECON 2123
(Instructor: Yao LI; TA: Astor FOK)
-----------------------------------------------------------------------------------------------------------------------------------[Pay attention to the deadline announced via LMES system]
100 marks total
Part I: Multiple Choice Questions. Choose the best answer. (10 marks, 2 marks each)
1. The money demand curve will shift to the left when which of the following occurs?
a. a reduction in the interest rate
b.
an increase in the interest rate
c.
an open market sale of bonds by the central bank
d.
an increase in income
e.
none of the above
2. At the current interest rate, suppose the supply of money is less than the demand for money. Given this information, we know that:
a. the price of bonds will tend increase.
b. the price of bonds will tend to fall.
c. production equals demand.
d. the goods market is also in equilibrium.
e. the supply of bonds also equals the demand for bonds.
3. The LM curve shifts down (or, equivalently, to the right) when which of the following occurs?
a. an increase in taxes.
b. an increase in output.
c. an open market sale of bonds by the central bank.
d. an increase in consumer confidence.
e. none of the above.
4. Suppose policy makers decide to reduce taxes. This fiscal policy action will cause which of the following to occur? a. the LM curve shifts and the economy moves along the IS curve.
b. the IS curve shifts and the economy moves along the LM curve.
c. both the IS and LM curves shift.
d. neither the IS nor the LM curve shifts.
e. output will change causing a change in money demand and a shift of the LM curve.
1
ECON 2123: Macroeconomics
Problem Set 2
Instructor: Yao Li
5. For this question, assume that investment spending depends only on the interest rate and no longer depends on output. Given this information, a reduction in the money supply
a. will cause investment to decrease.
b.