Econ2102_assgn3 - ECON 2102 Winter 2014 Christopher Gunn Assignment 3 Due date 4:00 pm Friday April 4 2014 Total Marks 100 A Multiple Choice(40 marks 1

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ECON 2102Winter 2014Christopher GunnAssignment 3Due date: 4:00 pm, Friday April 4, 2014Total Marks: 100A. Multiple Choice (40 marks)1. The basic IS-LMmodel takes ______ as exogenous. A) the price level and national income B) the price level C) national income D) the interest rate 2. According to classical theory, national income depends on ______, while Keynes proposed that ______ determined the level of national income. 3. The IScurve plots the relationship between the interest rate and ______ that arises in the market for ______. 4. In the Keynesian-cross model, if government purchases increase by 100, then planned expenditures ______ for any given level of income. 1
ECON 2102Winter 2014Christopher Gunn5. An explanation for the slope of the IScurve is that as the interest rate increases, the quantity of investment ______, and this shifts the expenditure function ______, thereby decreasing income. A) increases; downward B) increases; upward C) decreases; upward D) decreases; downward 6. In the Keynesian-cross model, a decrease in the interest rate ______ planned investment spending and ______ the equilibrium level of income. 7. The IScurve shifts when all of the following economic variables change except: 8. Along an IScurve allof the following are always true except: 9. The IScurve may be interpreted as showing the: A) interest rate that equates money supply and demand for given income. B) income level that equates money supply and demand for given interest rate. C) interest rate that equilibrates the market for loanable funds for given income. D) amount of loanable funds that will be demanded for given interest rate and income.