ec_Chapter 11

# ec_Chapter 11 - Chapter 11 Name Date 1 The interaction of...

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Name: __________________________ Date: _____________ 1. The interaction of the IS curve and the LM curve together determine: A) the price level and the inflation rate. B) the interest rate and the price level. C) investment and the money supply. D) the interest rate and the level of output. 2. In the IS-LM model when government spending rises, in short-run equilibrium, in the usual case, the interest rate ______ and output ______. A) rises; falls B) rises; rises C) falls; rises D) falls; falls 3. In the IS-LM model, the impact of an increase in government purchases in the goods market has ramifications in the money market, because the increase in income causes a(n) ______ in money ______. A) increase; supply B) increase; demand C) decrease; supply D) decrease; demand 4. If MPC = 0.75 (and there are no income taxes) when G increases by 100, then the IS curve for any given interest rate shifts to the right by: A) 100. B) 200. C) 300. D) 400. 5. In the IS-LM model under the usual conditions in a closed economy, an increase in government spending increases the interest rate and crowds out: A) prices. B) investment. C) the money supply. D) taxes. Page 1 6. Using the IS-LM analysis, if the LM curve is not horizontal, the multiplier for an increase in government spending is ______ for an increase in government purchases using the Keynesian-cross analysis. A) larger than the multiplier B) the same as the multiplier C) smaller than the multiplier D) sometimes larger and sometimes smaller than the multiplier 7. In the IS-LM model, changes in taxes initially affect planned expenditures through: A) consumption. B) investment.

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ec_Chapter 11 - Chapter 11 Name Date 1 The interaction of...

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