2002PRELIM1 - PART I: Multiple Choice: 10 points (each...

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PART I: Multiple Choice: 10 points (each question worth ½ point) 1. Assume planned investment falls by $200 billion and the equilibrium level of national income (Y) falls by $500 billion. Given this information, we know that: a. the MPC = 0.9 b. the MPC = 0.8 c. the MPC = 0.75 d. the MPC = 0.5 e. none of the above. In figure above, if the economy is in a recession, what must happen to reach potential GDP? d. The expenditure level must fall and/or the price level must rise e. The expenditure level must rise and/or the price level must fall f. The expenditure level must rise and/or the price level must rise g. The expenditure level must fall and/or the price level must fall h. None of the above 4. Whenever there is an increase in autonomous consumption spending, there will be a. an upward shift in the planned aggregate expenditure line causing equilibrium GDP to rise. b. an upward shift in the planned aggregate expenditure line, but no change in equilibrium GDP. c. no change in the planned aggregate expenditure line, but equilibrium GDP will rise. d. an upward shift in the planned aggregate expenditure line causing equilibrium GDP to fall. e. no change in the planned aggregate expenditure line or equilibrium GDP. 5. Which of the following actions by the Fed will result in a decrease in the money supply? a. Increasing the amount of loans made to commercial banks. b. Buying government securities in the open market. c. Increasing reserve requirements. d. Lowering discount rate. e. Printing more currency.
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6. When money demand is a positive function of income, which of the following statements in TRUE? a. A decrease of autonomous consumption will raise the equilibrium interest rate. b. A decrease of autonomous investment will raise the equilibrium interest rate. c. A decrease of government purchases will raise the equilibrium interest rate. d. A decrease in taxes will raise the equilibrium interest rate. e. None of the above. 7. Fill in the blanks. An open market sale of securities by the Fed results in a ( ) in reserves and a ( ) in the supply of money by an amount equal to the money multiplier times the change in reserves. 8. Fill in the blanks. The tendency for increases in government spending to cause a reduction in private investment spending is called the ( ). 9. A feature of a stock variable and a flow variable is that
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This note was uploaded on 04/03/2008 for the course ECON 1120 taught by Professor Wissink during the Spring '05 term at Cornell University (Engineering School).

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2002PRELIM1 - PART I: Multiple Choice: 10 points (each...

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