ec_Chapter 10

# ec_Chapter 10 - Chapter 10 Name Date 1 The IS-LM model...

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Chapter 10 Name: __________________________ Date: _____________ 1. The IS-LM model takes ______ as exogenous. A) the price level and national income B) the price level C) national income D) the interest rate 2. The variable that links the market for goods and services and the market for real money balances in the IS-LM model is the: A) consumption function. B) interest rate. C) price level. D) nominal money supply. 3. In the IS-LM model, which two variables are influenced by the interest rate? A) supply of nominal money balances and demand for real balances B) demand for real balances and government purchases C) supply of nominal money balances and investment spending D) demand for real money balances and investment spending 4. In the Keynesian-cross model, actual expenditures equal: A) GDP. B) the money supply. C) the supply of real balances. D) unplanned inventory investment. 5. Planned expenditure is a function of: A) planned investment. B) planned government spending and taxes. C) planned investment, government spending, and taxes. D) national income and planned investment, government spending and taxes. 6. When drawn on a graph with Y along the horizontal axis and E along the vertical axis, the line showing planned expenditures rises to the: A) right with a slope less than one. B) right with a slope greater than one. C) left with a slope less than one. D) left with a slope greater than one. Page 1 7. With planned expenditure and the equilibrium condition Y = E drawn on a graph with income along the horizontal axis, if income exceeds expenditure, then income is to the ______ of equilibrium income and there is unplanned inventory ______. A) right; decumulation B) right; accumulation C) left; decumulation D) left; accumulation 8. In the Keynesian-cross model, if the MPC equals .75, then a \$1 billion increase in government spending increases planned expenditures by ______ and increases the equilibrium level of income by ______.

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A) \$1 billion; more than \$1 billion B) \$.75 billion; more than \$.75 billion C) \$.75 billion; \$.75 billion
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ec_Chapter 10 - Chapter 10 Name Date 1 The IS-LM model...

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