Fall 05 Exam 2 Ans - Fall 2005 (IS-LM Model) 1 Name: _____...

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Unformatted text preview: Fall 2005 (IS-LM Model) 1 Name: _____ ANSWERS _____ (Last name, first name) SID: ____________________ Lecture (1 or 2): ____________________ UGBA 101B Macroeconomic Analysis for Business Decisions Dr. Steven Wood Fall 2005 Exam #2 ANSWERS Please sign the following oath: The answers on this test are entirely my own work. I neither gave nor received any aid while taking this test. I will not discuss the questions on this test until after 5:00 p.m. on November 1, 2005. ______________________ Signature Any test turned in without a signature indicating that you have taken this oath will be assigned a grade of zero. Graph Instructions When drawing diagrams, the following rules apply: a. Completely , clearly and accurately label all axis, lines, curves, and equilibrium points. b. The original diagram and equilibrium points MUST be drawn in black. c. The first shift of any line(s) and the new equilibrium points MUST be drawn in red. d. Any subsequent shifts in curves and new equilibrium points MUST be drawn in another color, first blue and then green. Do NOT open this test until instructed to do so. Fall 2005 (IS-LM Model) 2 A. Multiple Choice Questions . Circle the letter corresponding to the best answer. (30 points.) 1. From 1992 to 2004, the ratio of the money supply to the monetary base in Japan fell by one-half. This could have been due to: a. Bank failures in Japan. b. Increases in the monetary base. c. People increasing their deposits at banks. d. Lower reserve requirements imposed on banks. 2. If the LM curve is horizontal, then all of the following are TRUE except: a. There is more crowding out, compared to the usual case. b. Output changes (in response to changes in demand) are the same as in the Keynesian cross analysis. c. Fiscal policy is very effective, compared to the usual case. d. If investment increases by I, output increases by the multiplier times I. 3. In the IS-LM model, output will become more sensitive to changes in the money supply if: a. Investment becomes less sensitive to interest rates. b. The marginal propensity to import increases. c. The marginal propensity to import decreases. d. The marginal propensity to consume decreases. 4. Suppose unemployment is at the NAIRU and potential output suddenly increases. Then, if the fiscal authority wishes to stabilize the economy, a good policy would be to: a. Reduce government expenditure. b. A permanent tax cut to consumers. c. A temporary tax cut to consumers. d. A permanent tax cut for business firms. Fall 2005 (IS-LM Model) 3 5. Suppose the monetary authority increases the money supply significantly. This creates a lot of uncertainty, thereby making consumers save more. We can represent this as: a. A shift in of both the IS curve and the LM curve....
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This note was uploaded on 02/15/2010 for the course UGBA 08481 taught by Professor Levine during the Spring '09 term at University of California, Berkeley.

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Fall 05 Exam 2 Ans - Fall 2005 (IS-LM Model) 1 Name: _____...

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