Accounting
Anthropology
Archaeology
Art History
Banking
Biology & Life Science
Business
Business Communication
Business Development
Business Ethics
Business Law
Chemistry
Communication
Computer Science
Counseling
Criminal Law
Curriculum & Instruction
Design
Earth Science
Economic
Education
Engineering
Finance
History & Theory
Humanities
Human Resource
International Business
Investments & Securities
Journalism
Law
Management
Marketing
Medicine
Medicine & Health Science
Nursing
Philosophy
Physic
Psychology
Real Estate
Science
Social Science
Sociology
Special Education
Speech
Visual Arts
Banking
Q:
A decline in taxes ________ consumer expenditure and shifts the ________ curve to the ________, everything else held constant.
A. raises; LM; right
B. lowers; IS; left
C. raises; IS; right
D. lowers; LM; left
Q:
The IS curve shifts to the left when
A. taxes increase.
B. government spending increases.
C. the money supply increases.
D. autonomous planned investment spending increases.
Q:
A reduction in government spending 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. fall; IS; left
C. fall; LM; left
D. rise; IS; right
Q:
An increase in government spending 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; IS; left
D. fall; LM; left
Q:
A decrease in autonomous planned investment spending, other things equal, shifts the ________ curve to the ________.
A. IS; right
B. IS; left
C. LM; left
D. LM; right
Q:
In the Keynesian cross diagram, an increase in investment spending because companies become more optimistic about investment profitability causes the aggregate demand function to shift up, the equilibrium level of aggregate output to ________, and the IS curve to shift to the ________, everything else held constant.
A. rise; left
B. rise; right
C. fall; left
D. fall; right
Q:
In the Keynesian cross diagram, a decrease in investment spending because companies become more pessimistic about investment profitability causes the aggregate demand function to shift down, the equilibrium level of aggregate output to ________, and the IS curve to shift to the ________, everything else held constant.
A. rise; left
B. rise; right
C. fall; left
D. fall; right
Q:
In the Keynesian cross diagram, a decrease in investment spending because companies become more pessimistic about investment profitability causes the aggregate demand function to shift ________, the equilibrium level of aggregate output to fall, and the IS curve to shift to the ________, everything else held constant.
A. up; left
B. up; right
C. down; left
D. down; right
Q:
In the Keynesian cross diagram, an increase in investment spending because companies become more optimistic about investment profitability causes the aggregate demand function to shift ________, the equilibrium level of aggregate output to rise, and the IS curve to shift to the ________, everything else held constant.
A. up; left
B. up; right
C. down; left
D. down; right
Q:
In the Keynesian cross diagram, an increase in investment spending because companies become more optimistic about investment profitability causes the aggregate demand function to shift ________ and the equilibrium level of aggregate output to ________, everything else held constant.
A. up; rise
B. up; fall
C. down; rise
D. down; fall
Q:
In the Keynesian cross diagram, a decrease in investment spending because companies become more pessimistic about investment profitability causes the aggregate demand function to shift ________ and the equilibrium level of aggregate output to ________, everything else held constant.
A. up; rise
B. up; fall
C. down; rise
D. down; fall
Q:
A decline in autonomous planned investment spending causes the equilibrium level of aggregate output to ________ and shifts the ________ curve to the ________, everything else held constant.
A. rise; LM; right
B. rise; IS; right
C. fall; IS; left
D. fall; LM; left
Q:
A rise in autonomous planned investment spending causes the equilibrium level of aggregate output to ________ and shifts the ________ curve to the ________, everything else held constant.
A. rise; LM; right
B. rise; IS; right
C. fall; IS; left
D. fall; LM; left
Q:
Everything else held constant, changes in the interest rate affect planned investment spending and hence the equilibrium level of output, but this change in investment spending
A. merely causes a movement along the IS curve and not a shift.
B. is crowded out by higher taxes.
C. is crowded out by higher government spending.
D. is crowded out by lower consumer expenditures.
Q:
A decrease 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; IS; left
D. fall; LM; left
Q:
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
Q:
In the Keynesian cross diagram, an increase in autonomous consumer expenditure causes the aggregate demand function to shift up, the equilibrium level of aggregate output to ________, and the IS curve to shift to the ________, everything else held constant.
A. rise; left
B. rise; right
C. fall; left
D. fall; right
Q:
In the Keynesian cross diagram, a decline in autonomous consumer expenditure causes the aggregate demand function to shift down, the equilibrium level of aggregate output to ________, and the IS curve to shift to the ________, everything else held constant.
A. rise; left
B. rise; right
C. fall; left
D. fall; right
Q:
In the Keynesian cross diagram, a decline in autonomous consumer expenditure causes the aggregate demand function to shift ________, the equilibrium level of aggregate output to fall, and the IS curve to shift to the ________, everything else held constant.
A. up; left
B. up; right
C. down; left
D. down; right
Q:
In the Keynesian cross diagram, an increase in autonomous consumer expenditure causes the aggregate demand function to shift ________, the equilibrium level of aggregate output to rise, and the IS curve to shift to the ________, everything else held constant.
A. up; left
B. up; right
C. down; left
D. down; right
Q:
In the Keynesian cross diagram, an increase in autonomous consumer expenditure causes the aggregate demand function to shift ________ and the equilibrium level of aggregate output to ________, everything else held constant.
A. up; rise
B. up; fall
C. down; rise
D. down; fall
Q:
In the Keynesian cross diagram, a decline in autonomous consumer expenditure causes the aggregate demand function to shift ________ and the equilibrium level of aggregate output to ________, everything else held constant.
A. up; rise
B. up; fall
C. down; rise
D. down; fall
Q:
Other things equal, a decrease in autonomous consumption shifts the ________ curve to the ________.
A. IS; right
B. IS; left
C. LM; left
D. LM; right
Q:
The Federal Reserve increases interest rates when it wants to reduce aggregate demand to fight inflation. How do increases in the interest rate reduce aggregate demand?
Q:
Everything else held constant, if aggregate output is to the ________ of the IS curve, then there is an excess ________ of goods which will cause aggregate output to rise.
A. right; supply
B. right; demand
C. left; supply
D. left; demand
Q:
Everything else held constant, if aggregate output is to the ________ of the IS curve, then there is an excess ________ of goods which will cause aggregate output to fall.
A. right; supply
B. right; demand
C. left; supply
D. left; demand
Q:
Everything else held constant, if aggregate output is to the ________ of the IS curve, then there is an excess demand of goods which will cause aggregate output to ________.
A. right; fall
B. right; rise
C. left; fall
D. left; rise
Q:
Everything else held constant, if aggregate output is to the ________ of the IS curve, then there is an excess supply of goods which will cause aggregate output to ________.
A. right; fall
B. right; rise
C. left; fall
D. left; rise
Q:
Everything else held constant, if aggregate output is to the left of the IS curve, then there is an excess ________ of goods which will cause aggregate output to ________.
A. supply; fall
B. supply; rise
C. demand; fall
D. demand; rise
Q:
Everything else held constant, if aggregate output is to the right of the IS curve, then there is an excess ________ of goods which will cause aggregate output to ________.
A. supply; fall
B. supply; rise
C. demand; fall
D. demand; rise
Q:
The ________ describes points for which the goods market is in equilibrium.
A. LM curve
B. IS curve
C. consumption function
D. investment schedule
Q:
The ________ traces out the points for which total quantity of goods produced equals total quantity of goods demanded.
A. LM curve
B. IS curve
C. consumption function
D. investment schedule
Q:
Points on the IS curve satisfy ________ market equilibrium.
A. money
B. goods
C. stock
D. bond
Q:
The negative relation between investment spending and the interest rate is what gives the ________ curve its ________ slope.
A. IS; upward
B. IS; downward
C. LM; downward
D. LM; upward
Q:
A decrease in interest rates
A. increases the value of the dollar, net exports, and equilibrium output.
B. increases the value of the dollar, reducing net exports and equilibrium output.
C. reduces the value of the dollar, net exports, and equilibrium output.
D. reduces the value of the dollar, increasing net exports and equilibrium output.
Q:
An increase in interest rates
A. increases the value of the dollar, net exports, and equilibrium output.
B. increases the value of the dollar, reducing net exports and equilibrium output.
C. reduces the value of the dollar, net exports, and equilibrium output.
D. reduces the value of the dollar, increasing net exports and equilibrium output.
Q:
When interest rates fall in the United States (with the price level fixed), the value of the dollar ________, domestic goods become ________ expensive, and net exports ________.
A. falls; less; fall
B. falls; less; rise
C. falls; more; fall
D. rises; less; fall
Q:
When interest rates rise in the United States (with the price level fixed), the value of the dollar ________, domestic goods become ________ expensive, and net exports ________.
A. falls; less; fall
B. falls; more; rise
C. rises; more; fall
D. rises; less; fall
Q:
When the interest rate is ________, ________ investments in physical capital will earn more than the cost of borrowed funds, so planned investment spending is ________.
A. high; few; high
B. high; few; low
C. low; few; high
D. low; many; low
E. high; many; high
Q:
When the interest rate rises
A. planned investment falls.
B. planned investment rises.
C. planned investment will be unaffected.
D. equilibrium income increases.
Q:
If the interest rate falls, other things being equal, investment spending will
A. fall.
B. rise.
C. either rise, fall, or remain unchanged.
D. not be affected.
Q:
Keynes believed that unstable investment caused the Great Depression. Using the simple Keynesian model, explain how a fall in investment affects equilibrium output.
Q:
Equilibrium output is reduced by an increase in
A. planned investment.
B. taxes.
C. government spending.
D. net exports.
Q:
Aggregate output is increased by a decrease in
A. autonomous consumption.
B. government spending.
C. planned investment.
D. net taxes.
Q:
Aggregate output is ________ related to autonomous consumer expenditure, and is ________ related to the level of taxes.
A. negatively; negatively
B. negatively; positively
C. positively; negatively
D. positively; positively
Q:
Aggregate output is ________ related to autonomous consumer expenditure, and is ________ related to planned investment spending.
A. negatively; negatively
B. negatively; positively
C. positively; negatively
D. positively; positively
Q:
If net exports decrease by 250 and the mpc is 0.75, equilibrium aggregate output
A. increases by 1000.
B. increases by 750.
C. decreases by 750.
D. decreases by 1000.
Q:
If net exports increase by 250 and the mpc is 0.75, equilibrium aggregate output increases by
A. 250.
B. 500.
C. 750.
D. 1000.
Q:
If net exports increase by 100 and the mpc is 0.75, equilibrium aggregate output increases by
A. 100.
B. 250.
C. 400.
D. 750.
Q:
In an open economy, aggregate demand is the sum of
A. consumer expenditure, actual investment spending, and government spending.
B. consumer expenditure, planned investment spending, and government spending.
C. consumer expenditure, actual investment spending, government spending, and net exports.
D. consumer expenditure, planned investment spending, government spending, and net exports.
Q:
In a closed economy, aggregate demand is the sum of
A. consumer expenditure, actual investment spending, and government spending.
B. consumer expenditure, planned investment spending, and government spending.
C. consumer expenditure, actual investment spending, government spending, and net exports.
D. consumer expenditure, planned investment spending, government spending, and net exports.
Q:
Using the information in situation 20-2, if government increases their spending by $50 and increases net taxes by 50, then equilibrium aggregate output will change by
A. -$100.
B. -$50.
C. $50.
D. $100.
Q:
Using the information in Situation 20-2, if taxes increase by $10, then the equilibrium aggregate output will change by
A. -$90.
B. -$10.
C. $10.
D. $90.
Q:
Using the information in situation 20-2, if government spending increases by $100, then the equilibrium aggregate output will change by
A. -$1,000.
B. -$100.
C. $100.
D. $1,000.
Q:
Assume equilibrium at full employment for an economy characterized by the simple Keynesian model. If the government raises taxes to eliminate a budget deficit, then
A. the rate of unemployment will increase.
B. the level of aggregate output will increase.
C. the price level will increase.
D. the rate of interest will fall.
Q:
A tax cut initially
A. increases consumption expenditure by an amount greater than the tax cut.
B. increases consumption expenditure by an amount equal to the tax cut.
C. increases consumption expenditure by an amount that is less than the value of the tax cut.
D. has no effect on consumption expenditure.
E. reduces consumption expenditure by an amount that is less than the value of the tax cut.
Q:
The Keynesian framework indicates that government can play an important role in determining aggregate output by
A. changing the level of government spending or taxes.
B. raising consumer confidence.
C. raising investor confidence.
D. changing the money supply and interest rates.
Q:
In the simple Keynesian framework, declines in planned investment spending that produce high unemployment can be offset by raising
A. taxes.
B. government spending.
C. consumer confidence.
D. business confidence.
Q:
Keynes believed that changes in autonomous spending were dominated by unstable fluctuations in ________, which are influenced by emotional waves of optimism and pessimism–factors he referred to as "animal spirits."
A. unplanned investment spending
B. actual investment spending
C. planned investment spending
D. autonomous consumer expenditures
Q:
Keynes believed that changes in autonomous spending were dominated by changes in
A. consumer expenditure.
B. autonomous consumer expenditure.
C. investment spending.
D. taxes.
E. none of the above.
Q:
Using the information contained in Situation 20-1, if planned investment decreases by $100, the equilibrium aggregate output will change by
A. -$1,000.
B. $-100.
C. $100.
D. $1,000.
Q:
Using the information contained in Situation 20-1, if autonomous consumption increases by $100, then equilibrium aggregate output will change by
A. -$1,000.
B. -$100.
C. $100.
D. $1,000.
Q:
Using the information in Situation 20-1, the equilibrium level of aggregate output is
A. $900
B. $8,000
C. $9,000
D. $10,000
Q:
Using the information in Situation 20-1, if aggregate output equals $8,000, the unplanned inventory investment equals
A. -$100
B. $0
C. $100
D. $500
Q:
Using the information in Situation 20-1, if aggregate output is equal to $10,000, then unplanned inventory investment equals
A. -$1000
B. -$100
C. $0
D. $100
Q:
If aggregate demand equals output,
A. the economy is in a recession.
B. output will increase.
C. output will fall.
D. the economy is at its equilibrium level.
Q:
When the level of unplanned inventory investment is equal to zero, the economy is
A. in disequilibrium.
B. in a recession.
C. in equilibrium.
D. overheating
Q:
If actual output is greater than equilibrium output, firms will ________ output to keep from ________ inventories.
A. increase; accumulating
B. increase; depleting
C. decrease; depleting
D. decrease; accumulating
Q:
If actual output is less than equilibrium output, firms will ________ output to keep from ________ inventories.
A. increase; accumulating
B. increase; depleting
C. decrease; depleting
D. decrease; accumulating
Q:
If aggregated demand is less than actual output, unplanned inventory ________ will cause output to ________.
A. accumulation; rise
B. depletion; fall
C. depletion; rise
D. accumulation; fall
Q:
If aggregate demand falls short of current output, business firms will ________ production to ________ inventories.
A. cut; keep from accumulating
B. expand; keep from accumulating
C. cut; build up
D. expand; build up
Q:
If aggregate demand is less than the level of aggregate output, then ________ inventory investment will be ________.
A. planned; positive
B. actual; positive
C. actual; negative
D. planned; negative
Q:
A decrease in unplanned inventory investment for the entire economy equals the excess of
A. output over aggregate supply.
B. output over aggregate demand.
C. aggregate supply over output.
D. aggregate demand over output.
Q:
An increase in unplanned inventory investment for the entire economy equals the excess of
A. output over aggregate supply.
B. output over aggregate demand.
C. aggregate supply over output.
D. aggregate demand over output.
Q:
In the Keynesian framework, as long as output is ________ the equilibrium level, unplanned inventory investment will remain ________, firms will continue to lower production, and output will continue to fall.
A. below; negative
B. above; negative
C. below; positive
D. above; positive
Q:
In the Keynesian framework, as long as output is ________ the equilibrium level, unplanned inventory investment will remain ________, firms will continue to raise production, and output will continue to rise.
A. below; negative
B. above; negative
C. below; positive
D. above; positive
Q:
In the Keynesian framework, as long as output is below the equilibrium level, unplanned inventory investment will remain negative, firms will continue to ________ production, and output will continue to ________.
A. lower; fall
B. lower; rise
C. raise; fall
D. raise; rise
Q:
In the Keynesian framework, as long as output is ________ the equilibrium level, unplanned inventory investment will remain negative and firms will continue to ________ production.
A. below; lower
B. above; lower
C. below; raise
D. above; raise
Q:
In the Keynesian framework, as long as output is above the equilibrium level, unplanned inventory investment will remain ________ and firms will continue to ________ production.
A. negative; lower
B. negative; raise
C. positive; lower
D. positive; raise
Q:
In the Keynesian framework, as long as output is ________ the equilibrium level, unplanned inventory investment will remain positive and firms will continue to ________ production.
A. below; lower
B. above; lower
C. below; raise
D. above; raise