Practice+Exercises+for+Midterm+I (1)

Practice+Exercises+for+Midterm+I (1) - Practice Exercises...

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Practice Exercises for Midterm I Dr. El Hag- Econ 100 C 1. Which of the following occurs as the economy moves leftward along a given IS curve? a. an increase in the interest rate causes investment spending to decrease. b. an increase in the interest rate causes money demand to increase. c. an increase in the interest rate causes a reduction in the money supply. d. a reduction in government spending causes a reduction in demand for goods. e. an increase in taxes causes a reduction in demand for goods. ANS: A 2. For each interest rate, the LM curve illustrates the level of output where: a. the goods market is in equilibrium. b. inventory investment equals zero. c. money supply equals money demand. d. all of the above. e. none of the above. ANS: C 3. The LM curve shifts down (or, equivalently, to the right) when which of the following occurs? a. an increase in taxes. b. an increase in output. c. an open market sale of bonds by the central bank. d. an increase in consumer confidence. e. none of the above. ANS: E 4. During 2008 in the United States, consumer confidence fell significantly. Which of the following will occur as a result of this reduction in consumer confidence? a. the LM curve will shift up. b. the LM curve will shift down. c. the IS curve will shift rightward.
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This note was uploaded on 11/11/2011 for the course ECON 100 taught by Professor Chandle during the Spring '11 term at UC Irvine.

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Practice+Exercises+for+Midterm+I (1) - Practice Exercises...

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