Second set of questions for Quiz1 - Intermediate Macroeconomic Analysis 321:07 Fall 2014 Second set of questions for Quiz1 1 In the IS-LM model for the

Second set of questions for Quiz1 - Intermediate...

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Intermediate Macroeconomic Analysis 321:07 Fall 2014 Second set of questions for Quiz1 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 2) In the IS-LM model, for the long-run an increase in money supply will 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:

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