EC4710-Final-07

EC4710-Final-07 - NAME: ECONOMICS 4710 FINAL EXAM Louisiana...

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Unformatted text preview: NAME: ECONOMICS 4710 FINAL EXAM Louisiana State University Instructor: Bulent Unel Date: December 14, 2007 Important: This is a closed book exam. The exam has two parts. The first part consists of 20 multiple choice questions and the second part consists of 2 quantitative questions. Check that you have them all. Do not take any part of this exam with you when you leave. Part I: Multiple Choice Questions (Each 2.5 pts). 1. According to the Keynesian-cross analysis, if MPC stands for marginal propensity to consume, then a rise in taxes of 4 T will: a. increase equilibrium income by 4 T. b. decrease equilibrium income by 4 T/ (1- MPC ) . c. decrease equilibrium income by 4 T × MPC/ (1- MPC ) . d. not affect equilibrium income at all. Answer: c 2. Along any given IS curve: a. tax rates are fixed, but government spending varies. b. government spending is fixed, but tax rates vary. c. both government spending and tax rates vary. d. both government spending and tax rates are fixed. Answer: d 3. According to the theory of liquidity preference, if the supply of real money balances exceeds the demand for real money balances, individuals will: a. sell interest-earning assets in order to obtain non-interest-bearing money. b. purchase interest-earning assets in order to reduce holdings of non-interest-bearing money. c. purchase more goods and services. d. be content with their portfolios. Answer: b 4. Equilibrium levels of income and interest rates are —– related in the goods and services market, and equilibrium levels of income and interest rates are —– related in the market for real money balances. a. positively; positively b. positively; negatively 2 c. negatively; negatively d. negatively; positively Answer: d 5. In the IS-LM model, a decrease in government purchases leads to a(n) —– in planned expenditures, a(n) —– in total income, a(n) —– in money demand, and a(n) —– in the equilibrium interest rate. a. decrease; decrease; decrease; decrease b. increases; increase; increases; increase c. decrease; decrease; increase; increase d. increase; increase; decrease; decrease Answer: a 6. The reason that the income response to a fiscal expansion is generally less in the IS- LM model than it is in the Keynesian-cross model is that the Keynesian-cross model assumes that: a. investment is not affected by the interest rate whereas in the IS-LM model fiscala....
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This note was uploaded on 05/06/2008 for the course ECON 4710 taught by Professor Unk during the Spring '07 term at LSU.

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EC4710-Final-07 - NAME: ECONOMICS 4710 FINAL EXAM Louisiana...

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