Chap010 - Chapter 10 Money Interest and Income Chapter 10...

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Chapter 10 - Money, Interest, and Income Chapter 10 Money, Interest, and Income Multiple Choice Questions 1. Over the last three decades, in which years have interest rates on U.S. Treasury bills been at their highest level? a. 1976 B . 1981 c. 1986 d. 1996 e. 2002 Difficulty: Easy 2. Looking at the behavior of interest rates over time, we realize that a. They tend to fall before a recession b. They tend to be high before a recession and fall during a recession c. They tend to rise in a recovery and fall in a recession d. They tend to be high in a recession E . Both B and C Difficulty: Easy 3. The level of investment spending is affected by changes in the interest rate, since higher interest rates A . Will increase the cost of borrowing and thus lower the incentive to purchase capital equipment b. Will make it more profitable to invest in the stock market c. Will increase the return on saving d. Will lower the value of government bonds so banks will lend more to firms and less to the government e. All of the above Difficulty: Easy 10-1
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Chapter 10 - Money, Interest, and Income 4. Interest rate changes have an important side effect on the economy since even a small change in interest rates can significantly change A . The composition of output demanded b. The level of private saving c. The level of consumption d. The level of government spending e. None of the above Difficulty: Medium 5. The two major determinants of the level of private investment spending are A . The interest rate and business expectations b. The levels of national income and saving c. Levels of consumption and saving d. Corporate income taxes and the level of saving e. Interest rates and the level of private saving Difficulty: Easy 6. In the IS-LM model, the interest rate serves as a link between a. Household saving and business investment b. Government spending and consumer spending c. Actions of the central bank and changes in consumer spending D . The goods market and the assets market e. Domestic markets and foreign markets Difficulty: Easy 10-2
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Chapter 10 - Money, Interest, and Income 7. If the level of government transfer payments increases while everything else stays the same, then a. The IS-curve will shift to the left B . The IS-curve will shift to the right c. The IS-curve will become flatter and shift to the right d. The LM-curve will shift to the right e. The LM-curve will become flatter and shift to the right Difficulty: Easy 10-3
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Chapter 10 - Money, Interest, and Income 8. If investment becomes more responsive to changes in the interest rate, then a. The size of the government spending multiplier will increase b. A given increase in the interest rate will lead to a larger increase in income C . The IS-curve will become flatter d. The IS-curve will become steeper e. Both A and C Difficulty: Medium 9. From which of the following equations can the equation for the IS-curve be derived? a. I + G + NX = S + TA - TR
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This note was uploaded on 12/05/2011 for the course ECON 201 taught by Professor Dr.matin during the Spring '09 term at Charleston.

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Chap010 - Chapter 10 Money Interest and Income Chapter 10...

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