ecChapter 11 - Chapter 11 Name: __________________________...

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Unformatted text preview: Chapter 11 Name: __________________________ Date: _____________ 1. An increase in taxes lowers income: A) and the interest rate in the short run, but leaves both unchanged in the long run. B) in the short run, but leaves it unchanged in the long run, while increasing consumption and lowering investment. C) in the short run, but leaves it unchanged in the long run, while lowering consumption and increasing investment. D) and the interest rate in both the short and long runs. 2. An increase in the money supply: A) increases income and lowers the interest rate in both the short and long runs. B) increases income in both the short and long runs, but leaves the interest rate unchanged in the long run. C) lowers the interest rate in both the short and long runs, but leaves income unchanged in the long run. D) lowers the interest rate and increases income in the short run, but leaves both unchanged in the long run. 3. If money demand does not depend on income, then the ______ curve is ______. A) IS ; vertical B) IS ; horizontal C) LM ; vertical D) LM ; horizontal 4. If consumption is given by C = 200 + 0.75( Y – T ) and investment is given by I = 200 – 25 r , then the formula for the IS curve is: A) Y = 400 – 0.75 T – 25 r + G . B) Y = 1,600 – 3 T – 100 r + 4 G . C) Y = 400 + 0.75 T – 25 r – G . D) Y = 1,600 + 3 T – 100 r – 4 G . 5. Those economists who believe that monetary policy is more potent than fiscal policy argue that the: A) responsiveness of money demand to the interest rate is large. B) responsiveness of money demand to the interest rate is small. C) IS curve is nearly vertical. D) LM curve is nearly horizontal. Page 1 6. If the investment demand function is I = c – dr and the quantity of real money demanded is eY – fr , then fiscal policy is relatively potent in influencing aggregate demand when d is ______ and f is ______....
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This note was uploaded on 11/28/2010 for the course ECO 2023 taught by Professor Foran during the Fall '08 term at Miami Dade College, Miami.

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ecChapter 11 - Chapter 11 Name: __________________________...

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