Quiz1 _with answers and comments_ Fall 2014 IM - Rutgers University Int Macro Analysis Fall 2014 Instructor Antonio Cusato Novelli Quiz 1 1 In the IS-LM

Quiz1 _with answers and comments_ Fall 2014 IM - Rutgers...

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Rutgers University Int. Macro Analysis Fall 2014 Instructor: Antonio Cusato Novelli Quiz 1 1) In the IS-LM model, for the short-run an increase in government expenditures will A) Increase GDP and private investment B) Reduce GDP and private investment C) Increase GDP and reduce private investment D) Reduce GDP and increase private investment Answer: C See slide 21 of PPT3 2) In the IS-LM model, for the long-run a contraction in money supply will See slide 25 of PPT3 3) In the IS-LM model, for the short-run an increase in government expenditures will initially shift the IS to the right, increasing GDP for a fixed interest rate. You can see this on the figure on the right. The initial increase in GDP is from point A to point B in the figure. After point B is reached, the following will happened: 18 of PPT3

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