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Unformatted text preview: LM curve: Answer 10 points Question 7 Question 7 1. According to the theory of liquidity preference, holding the supply of real money balances constant, an increase in income will ______ the demand for real money balances and will ______ the interest rate. Answer 10 points Question 8 Question 8 1. In the Keynesian-cross model with a given MPC, the government-expenditure multiplier ______ the tax multiplier. Answer 10 points Question 9 Question 9 1. In the Keynesian-cross model, if government purchases increase by 250, then the equilibrium level of income: Answer 10 points Question 10 Question 10 1. (Exhibit: Keynesian Cross) Reference: Ref 10-1 (Exhibit: Keynesian Cross) In this graph, if firms are producing at level Y 1 , then inventories will ______ inducing firms to ______ production. Answer...
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- Spring '11