Chapter 24

Chapter 24 - Chapter 24 Exercise: . Key terms 1. Long run...

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Chapter 24 Exercise: . Key terms 1. Long run monetary neutrality 2. complete crowding out 3. Natural rate level of output 4. AD curve . Multiple choices 1. AD curve In the Keynesian cross diagram, a decline in autonomous consumer expenditure causes the aggregate demand function to shift _____ and the equilibrium level of aggregate output to _____. a. up; rise b. up; fall c. down; rise d. down; fall 2. Changes in the interest rate affect planned investment spending and hence the equilibrium level of output, a. but this change in investment spending merely causes a movement along the IS curve and not a shift. b. but this change in investment spending is crowded out by higher taxes. c. but this change in investment spending is crowded out by higher government spending. d. but this change in investment spending is crowded out by lower consumer expenditures. 3. An increase in government spending causes the equilibrium level of aggregate output to _____ at any given interest rate and shifts the _____ curve to the _____. a. rise; LM; right b. rise; LM; left c. fall; IS; left d. fall; LM; left e. rise; IS; right 4. A tax cut ______ disposable income, ______ consumption expenditure, and shifts the IS curve to the _____. a. increases; increases; right b. increases; decreases; left c. decreases; increases; left d. decreases; decreases; right e. decreases; decreases; left 5. A shift in tastes toward American goods _____ net exports and causes the quantity of aggregate output demanded to _____. a. decreases; rise b. decreases; fall c. increases; rise d. increases; fall 6. If the Federal Reserve conducts open market purchases, the money supply _____, shifting the LM curve to the _____. a. decreases; right b. decreases; left c. increases; right
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d. increases; left 7. As bonds become a riskier asset, the demand for money _____ and, all else constant, the equilibrium interest rate _____. a. rises; rises b. rises; falls c. falls; rises d. falls; falls 8. In the ISLM framework, an expansionary monetary policy causes aggregate output to _____ and the interest rate to _____. a. increase; increase
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Chapter 24 - Chapter 24 Exercise: . Key terms 1. Long run...

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