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Chap011 - Chapter 11 Monetary and Fiscal Policy Chapter 11...

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Chapter 11 - Monetary and Fiscal Policy Chapter 11 Monetary and Fiscal Policy Multiple Choice Questions 1. A change in which of the following will NOT shift the IS-curve? a. Autonomous investment B . Autonomous money demand c. Autonomous consumption d. Autonomous net exports e. Autonomous saving Difficulty: Easy 2. If money supply is held constant, a cut in government transfer payments will eventually cause interest rates to Difficulty: Medium 3. In an IS-LM model, if the government enacts restrictive fiscal policy through a tax increase or a cut in government purchases, Difficulty: Medium 11-1
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Chapter 11 - Monetary and Fiscal Policy 4. When the government employs a "tight fiscal policy," we should expect that Difficulty: Easy 5. One side effect of expansionary fiscal policy is that A . Higher interest rates cause a change in the composition of GDP b. Higher interest rates significantly increase private saving c. Consumption spending is crowded out d. The Fed has to reinforce the policy through open market sales e. All of the above Difficulty: Medium 6. Monetary policy becomes more effective as a. The marginal propensity to save increases B . The interest sensitivity of money demand decreases c. The interest sensitivity of investment decreases d. The income tax rate increases e. None of the above Difficulty: Medium 11-2
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Chapter 11 - Monetary and Fiscal Policy
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