Exam 3 - Exam III FALL 05' Version Name..._-.____..w...

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Unformatted text preview: Exam III FALL 05' Version Name..._-.____..w MULTIPLE CHOICE. Choose the one alternative that BEST COMPLETES the statement or answers the question. 1) The. opportunity cost of holding money is A) the price level. B) the level of income. C) the interest rate. D) all of the above. B) only A and B of the above. Answer: C 2) The velocity of money is A) the average number of times that a dollar is spent in buying the total amount of final goods and services. 8) the ratio of the money stock to interest rates. (I) the ratio of the money stock to high—powered money. D) none of the above. Answer: A \ 3, if the money supply is 100 and nominal GDP is 500 the velocity of money is A) .2” B) 5. C) 8. D) .05 E) none of the above Answer: B 4) Keynes reasoned that consumer expenditure is most closely related to A) the level of interest rates. B) the marginal tax rate. C) the-price level. D) disposable income. Answer: D ? g a; V 3 mxm «mmmrmzmw awn“ mum, “wt-“Amy” 5) If the consumption function is x 30 + 0.8(Y-T), then a $200 increase in disposable income will increase consumer expenditure by . A) 60. 13) 160. -' C) 190 D) 230 x E) 1000 Answer: B 6), The equilibrium condition in the Keynesian model occurs when is) producers are unable to sell all their output and have no reason to change their level ot production. 8) aggregate output produced equals aggregate output demanded. C) aggregate output is equal to its full employment level. '0) when the interest rate clears the money market E) producers sell more than they are producing Answer: B 7) if aggregate demand exceeds actual output, A) there will be unplanned inventory depletion. B) there will be unplanned inventory accumulation. C) there will be unplanned inventory accumulation causing output to rise. D) there will be unplanned inventory depletion causing output to fall. Answer: A 8) If the marginal propensity to consume is .98, the value of the expenditures multiplier is A) 5. ' mm) .1. Au \ I C) 20 D) 50 E) cannot be determined. Answer: D 9) For every dollar increase in planned investment spending, aggregate output A) increases by one dollar. B) increases by more than one dollar. C) decreases by less than one dollar. D) increases by less than one dollar. Answer: B 10) An increases in taxes A) reduces planned investment. B) reduces equilibrium output. C) increases disposable income. D) all of the above. E) none of the above. Answer: 13 11) In an open economy, aggregate demand is the sum of A) consumer expenditure, investment spending, and government spending. B) consumer expenditure, investment spending, government spending, and net exports. C) consumer expenditure, investment spending, and government spending. D) actual investment spending, government spending, and net exports. Answer: B 12) Equilibrium output is reduced by A) an increase in government spending. B) a decrease in autonomous consumption C) a tax cut. D) an increase in planned investment. E) increase in the money supply Answer: B 13) When the interest rate rises, A) equilibrium income increases. B) planned investment falls. C) planned investment will be unaffected. D) planned investment rises. Answer: B 14) The _h___ describes points for which the goods market is in equilibrium. A) investment schedule B) IS curve C)'co.nsumption function D) LM curve Answer: B 15) The money market is in equilibrium A) at any point on the IS curve. B) at any point on the LM curve. C) at any point on the ISLM diagram. D) only at the intersection of the IS and LM curves. E) at only one point on the LM curve. Answer: B 16) Given the following information determine the Aggegate Demand equation. autonomdus spending 1008 Taxes 1008 Government spending 4008 Net expat-*2 ~1508 Exports 758 ‘ hwestement 3008 interest rate 3% mpc =. .90 mp5 2 .10 A) yAD r: 6358 + 0.9Y ’13) yAD : 635 + 0.1Y C) yAD = "8513 + 0.9Y D) yAD = 5608 + 0.9Y E) yAD = 5608 + (HY Answer: I) 17) Given the following information determine the level of equilibrium output (Y) given: YAD = 600 + 0.90/4") Taxes 1008 A 1 can 1,1, A/UU 13) 690 C) 5100 D) 6000 E) 6900 Answer: C 18) The E curve shifts to the left when A) the money supply increases. B) govemment spending increases. C) taxes increase. D) the price level decreases. l3) all of the above occur, Answer: C 19) Which of the following does not shift the IS curve? A) A decline in government spending B) An increase in government spending C) A fall in the interest rate I); ’13:: increase in autonomous consumption Answer: C 20) If the Federal Reserve conducts open market sales, the‘money supply __._, shifting the LM curve to the A) increases; left B) decreases; left C) increases; right D) decreases; right Answer: B 21) An increase in the money supply shifts the curve and causes A) IS; aggregate output to increase B) IS; interest rates to increase C) LM; aggregate output to increase D) LM; interest rates to increase E) none of the above -. .,_ u . 4’" JALIJVYCL. x. 22) An increase in autonomous money demand, other things equal, shifts the curve to the A) LM; left B) LM; right C) IS; left D) IS; right Answer: A 23) in the long—run ISLM model, the long-run effect of an expansionary monetary policy is to 1 A) increase the interest rate and leave real output unchanged. B) decrease real output and the interest rate. C) increase real output and the interest rate. V I D) increase real output and leave the interest rate unchanged. E) no change in either‘real output or the interest rate. Answer: ’3 interest Rate 132 181 Aggregate Output Figure 24~‘]. 24) In Figure 24—4, the economy moves from point 4 to point 1 whenever A) axes are decreased. B) increase in the interest rate C) decrease in business investment D) government spending decreases. E) the nominal money supply decreases. Answer: E 25) In Figure 244, the economy moves from point 2 to point 1 whenever A) government spending declines. B) taxes are decreased. C) investment expenditures unrelated to the interest rate increase. D) imports increase E) a and :1 above . Answer: E 26} The total quantity of final goods and services offered for sale at different price levels is st) the aggregate demand curve. B) the aggregate supply curve. C) the Phillips curve. D) the 45 0 line in the Keynesian Cross Model. ll) both A and D of the above. Answer: B 27) According to the Keynesians, an increase in government spending, other things equal, shifts the aggregate curve to the __ > A) supply; right B) supply; left C) demand; right D) demand; left Answer: C 28) According to the Keynesians, a decrease in net exports, other things equal, shifts the aggregate curve to the A) demand; left. ‘ B) supply; right C) supply; left D) demand; right Answer: A 29) The. aggregate demand curve shifts to the left (decreases) when A) the price level increases. B) taxes are increased. C) the money supply falls. D) all of the above. E) both B and C of the above. Answer: E 30) The aggregate supply curve shows the relationship between A) the level of inputs and aggregate output. {5111; price level and the level of inputs. C) the price level and the level of aggregate output supplied. D) the wage rate and the level of employment. Answer: C Yn Y2 Aggregate Output Figure 25~l 34) In Figure 25—1 the economy could be in long—run equilibrium only at A) point 1. B) point 4. C) points 1 and 4 D) points 1 and 3. E) point 3. Answer: D 35) In Figure 25—1 the economy is not in long—run equilibrium at point 2 because A) the labor market is relatively easy, putting upward pressure on wages. B) the labor market is relatively easy, putting downward pressure on wages. C) the labor market is relatively tight, putting upward pressure. on wages. D) the labor market is relatively light, putting downward pressure on wages. Answer: C 36) Use the AD— AS model in Figure 25—1 and start with AD1=A81. The ultimate (long run) effect of an increase in the money supply is illustrated as a movement from A) point 1 to point 2. B) point 2 to point 3. C) point 1 to point 3. D) point 2 to point 1. Answer: C 31) The long-run rate of unemployment to which an economy always gravitates is the A) neutral rate of unemployment. '8) minimum rate of unemployment; C) inflationary rate of unemployment. D) normal rate of unemployment. E) natural rate of unemployment. Answer: E 32) An increase in the cost of production shifts the aggregate curve to the A) demand; right B) demand; left C) supply; left D) supply; right Answer: C 33) When actual output is less than the natural rate level of output A) neither curve shifts. B) the aggregate demand curve shifts to the right. C) the aggregate supply curve shifts to the left. D) the aggregate demand curve shifts to the left. E) the aggregate supply curve shifts to the right. Answer: E 37) In Figure 25-1 the ultimate (long run) effect of an increase in government spending is illustrated as a movement from A) point 1 to point 2. B) point 2 to point 3. l C) point i at point 3. D) point 2 in point 1. Answer: C 38) The long—run aggregate supply curve is a vertical line passing through A) the. actual rate of unemployment. B) the natural rate 'of output. C) the natural—rate price level. D) the expected rate of inflation. E) all of the above. Answer: B 39) A decrease in the availability of raw materials that increases the price level is called a(n) A) beneficial demand shock. B) adverse supply shock. C) beneficial supply shock. D) adverse demand shock. Answer: B 40) if nothing else changes, an increase in the price level A) shifts the LM curve to the right 8) shifts the IS curve to the left. C) shifts the is curve to the right D) shifts the LM curve to the left E) increases the real. money supply Answer: D ...
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This note was uploaded on 01/10/2012 for the course ENGR 1332 taught by Professor Nazemetz during the Fall '08 term at Oklahoma State.

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Exam 3 - Exam III FALL 05' Version Name..._-.____..w...

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