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Unformatted text preview: Economics 3123 Intermediate Macroeconomics Fall 2007 Exam 2 November 30. 2007 Multiple Choice: Please write your name, exam number, and date on the Scantron form. Select the best
answer to each question and mark the corresponding letter on the Scantron answer sheet. Draw graphs,
mark answers, or write on this question booklet if it helps you answer the questions. 1. A short—run Phillips curve is based on a given:
A. level of aggregate production. expected inflation rate.
C. unemployment rate.
D. employment rate.
E. level of income.
2. The intersection of the IS and LM curves indicates:
A. zero inﬂation.
B. full employment.
Q.) equilibrium in both the prgd/rgt and money markets.
D. equilibrium in the product but not the money market.
E. equilibrium in the money but not the product market.
3. Stagflation during the 1970s resulted in and can be illustrated by a(n): the intersection of the short—run Phillips curve and the longrun Phillips curve. upward/rightward shift of the short—run Phillips curve.
C. downward/leftward shift of the short—run Phillips curve.
D. leftward shift of the long—run Phillips curve. E. rightward shift of the long—run Phillips curve.
4. Equilibrium in the product market is necessarily associated with: A.
B.
C.
(E)
E. X The aggregate production function used in the Solow growth model is assumed to have: equilibrium in the resource market.
equilibrium in the money market.
nothing relevant to IS—LM analysis.
a point on the IS curve. a point on the LM curve. (immnﬂanfreturmalerr ' C. a constant quantity of labor. a constant quantity of capital.
DrumWinereasing~returns~te~~scalem
E. w ..decreasing_returnsato~scale.mm 6. In the Solow growth model, the Golden Rule identifies the: A.
@3
c.
D.
E. steady—state capital—labor ratio that maximizes the output—labor ratio.
steady—state capitallabor ratio that maximizes the consumption—labor ratio.
steady—state capital—labor ratio that maximizes the investment—labor ratio. capitallabor ratio that achieves a steady state.
consumptionJabor ratio that achieves a steady state. I J 13. One of two key endogenous variables in the ISLM model is: A. autonomous investment.
B. monetary policy. C. fiscal policy. D. the price level. < E. the interest rate. “1mm 14. A decrease in financial wealth is most likely to result in: neither a shift of nor a movement along the IS curve.
a downward movement along the IS curve. an upward movement along the IS curve. a rightward shift of the IS curve. a leftward shift of the IS curve. meow» co 15. If the intersection of the short—run Phillips curve and the long—run Phillips curve is at a zero
inflation rate and the natural unemployment rate, then:
Cg.) expected inflation is zero. .‘ expected inﬂation is less than zero.
C. expected inﬂation is greater than zero.
D. natural unemployment is equal to cyclical unemployment.
E. natural unemployment is less than cyclical unemployment.
16. The IS—LM model contains a LM curve and a IS curve.
A. vertical, horizontal A B. horizontal, vertical C. negativelysloped, positivelysloped A.ijng
(“inD positivelysloped, negativelyjslopgd E. U—shaped, reverse L—shaped WW*"'”“W‘“M«W
17. If household income decreases from $1,000 to $900 and consumption decreases from $950 to
$850, then the MPC is:
A. 0.00.
B. 0.25. ’i
c. 0.50. to ~  ‘ '
D. 0.75. 1.00.
18. The IS curve is the relation between:
A. production and aggregate expenditures.
income and the interest rate.
. ' ve‘stmenpandasaving.
WWWndmded. M'EWW'thrsmoney«sumaled"’the”interest rate. A shift of the money demand curve that results from a change in income will result in a(n):
l >§ shift of the 45—degree line. \ _ V WLM
shift of the LM curve. ‘ 
shift of the IS curve. . 775 movement along the IS curve.
movement along the LM curve. Ah: 4? A
B.
C.
D
E ‘\ k ‘ — '7
1 I IS ‘
l‘ 7 ‘3 l l %
I Y A shift of the Keynesian aggregate expenditures line due to a change in the interest rate Will res t LA
1 / I , I
‘ ‘ ’l ‘.
J A. movement along the IS curve. B. movement along the LM curve.
C. shift of the LM curve shift of the IS curve. ’2‘ E. shift of the 45—degree line. shift of the IS curve. A. shift of thewkhﬁ/In‘curye C. shift of thedéeyrre'sﬁh aggregate expenditures line.
D
E movement along the LM curve.
movement along of the Keynesian aggregate expenditures line. 29. In the Phillips curve analysis, the vertical curve represents the relation between inﬂation and
unemployment in the:
A. counter—cyclical run.
B. very, very short run. m
C. short run.
® long run. ’
E. very short run. 30. Professor Amos contends financial markets and the Social Security system will experience serious
problems beginning around 2020 due in large part to:
A. too much education.
B. high levels of human capital.
@ retirement by Baby Boomers.
fB: an increase in the marginal propensity to save. excessive investment in physical capital.
31. Equilibrium in the money market is necessarily associated with: a point on the LM curve. a point on the IS curve.
equilibrium in the resource market. equilibrium in the product market.
nothing relevant to IS—LM analysis. mcomé) 32. The macroeconomic relation between inﬂation and unemployment is illustrated by the: IS curve.
LM curve. A.
B.
@3 Phillips curve.
D. aggregate expenditures line.
E. money demand curve. 40. A negative, or indirect, relation between income and the interest rate that is used to analyze short A B.
E. run macroeconomic conditions is the: *
.‘L . money supply curve.
money demand curve.
IS curve. LM curve.
aggregate expenditures line. 41. Contractionary monetary policy can be represented as: m®ow> a rightward shift of the IS curve. a rightward shift of the LM curve. a leftward shift of the IS curve. a leftward shift of the LM curve. no shift of either theu'Ichmii‘rwvei‘BY‘LM curve. 42. Economic growth is ultimately achieved through the process of: A. regulation. B. consumption. C. unemployment. D. inﬂation. 6%) investment. 43. The aggregate production function used in the Solow growth model has a:
f; A. zero slope. * B. positive slope that becomes steeper. « C. negative slope that becomes steeper. / Q) positive slope that becomes ﬂatter. / E. negative slope that becomes ﬂatter. 44. Contractionary fiscal policy can be represented as: A. E. a rightward shift of the IS curve. a 19mg shift of the a leftwamhift of the LM Curve. no shift of either the IS curve or LM curve.
a rightward shift of the LM curve. 45. In the Phillips curve analysis, the negatively—sloped curve represents the relation between inﬂation
If”.an unemployment in the: mpowa 46. In the Solow growth model, steady—state growth is achieved by equality between: F1150??? population growth and technological change.
:‘investment and depreciation. short run. I _
Very long run ..._‘I,ij;:x, very, very long run. " 'i
countercyclical run. I . .7 H long run. saving and consumption.
production and depreciation.
consumption and investment. 47. A positive, or direct, relation between income and the interest rate used to analyze short—run macroeconomic conditions is the: r
A. aggregate expenditures line.
B. IS curve.
© LM curve.
D. money demand curve.
E. money supply curve. r
48. In the IS—LM model, expansionary fiscal policy results in in the interest rate and
in production. Y an increase, a decrease {all a decrease, an increase
a decrease, a decrease
no change, no change
an increase, an increase m @UOW? If ’ «yarns». nyllLyv i » n, 3% A decrease in the population growth rate has the same impact in the Solow growth model as a(n): decrease in the output—labor ratio. B. decrease in the capital—labor ratio. C. decrease in the capital depreciation rate.decrease in investment. D. decrease in the saving rate. E. An economic cycle that lasts approximately 20 years is termed the cycle. A. Kuznets . \ ‘ J B. Kondratieff 1x, / C. Amos W WWWW
D. Kitchin E. J uglar /& gaiaw WWW “61“
‘l‘ ix; vac 33. The annual growth rate of the US. economy over the past 200 years has been approximately: A. ~5%
B. 3%.
C. 0%. CD) 3%.
E. 5%. 34. In the derivation of the IS curve, a lower interest rate causes:
A. no shift of either the AE line or IS curve.
j an unmadshiftgﬁ El}? AB “113 K C. a leftward shift of the IScurve. «WWW W 3W” “ D. a downward shift of the AE line.
E. a rightward shift of the IS curve. W 35. In the IS—LM model, expansionary monetary policy results in l in the interest rate and
in production.
A. an increase, a decrease
B. an increase, an increase C. no change, no change
D. a decrease, a decrease . t“ ' ‘  / a W se, an Increase WWW”
36. A macroeconomic model in which Income is an exogenous variable and the interest rate IS an
endogenous variable is the:
A. Amos core—periphery model.
0 B. Solow growth model.
. IS curve.
LM curve.
B. Keynesian product market. 37. The position of the long—run Phillips curve is based on the:
A. expected rate of unemployment.
@ natural unemployment rate.
. natural inﬂation rate.
D. expected rate of inflation.
E. cyclical rate of unemployment. 38. In the IS—LM model, a rightward shift off the IS curve can result from:
A. a constant price level. ‘V B. a decrease in production. expansionary fiscal policy.
. I conuactionarywmonetarrpoﬁcy. an increase in the interest rate. atural unemployment is the combination of:
cyclical and seasonal unemployment.
cyclical and structural unemployment.
seasonal and frictional unemployment.
frictional and structural unemployment. frictional and cyclical unemployment. D
E
39. N
A
B
C we 6 20. An intersection of the IS and LM curves that occurs to the left of the full—employment level of production results in:
A. the natural unemployment rate.
a recessionary gap.
C. an inﬂationary gap.
D. disequilibrium in the money market.
E. disequilibrium in the product market. 21. In the IS—LM model, a lefttward shift off the LM curve can result from:
expansionary fiscal policy. an increase in the interest rate. a constant price level. a decrease in production. contractionary monetary policy. @uow 22. In the Solow growth model, a decrease in the saving rate results in a(n): ; \ A. decrease in aggregate production. B. upward shift of the aggregate production function.
C. downward shift of the aggregate production function. increase in the steady—state capital—labor ratio. decrease in the steady—state capital—labor ratio. 23. The LM curve is the relation between:
A. ' :"‘“ :P:,. 3. income and the interest rate. \ D. the money supply and the interest rate. X ,1 WWW 24. A decrease in the price level is most likely to result in: 8W,” h
A. neither a shift of nor a movement along the LM curve.
\3 B. a downward movement along the LM curve.
X C. an upward movement along the LM curve. \‘* a rightward shift of the LM curve.
E. a leftward shift of the LM curve. 25. In the IS—LM model, contractionary monetary policy results in in the interest rate and
in production. ® an increase, a decrease M ‘a
B.
C
D
E an increase, an increase if g i dammow meﬂiwgw a no change, no change a decrease, an increase a decrease, a decrease MWMWW
26. In the Keynesian model, at the intersection of the 45degree line and the C + I + G + (X  M) line:
(ZS) there are no economy—wide surpluses or shortages.
B the—economyhasneeessarily achieved full employment.
C aggregate expenditures are not equal to aggregate production.
D aggregate productionwill»decrease‘to‘achieve equilibrium.
E business inventories will increase. >4 12. The AD curve can be derived from the IS LM model tracing Shifts resulting from changes in . K; A. LM, the price level EN,“ L. 1‘st 3 LM, the interest rate I l,\ C" 13: money demand in r D~ IS, A in few Kn! straight, positively—sloped line. E. straight, negativelysloped line.
A major Keynesian critique of classical economics is that:
A. prices aresﬂezgible.
B. full employment is maintained.
C. supply creates its own demand.
D. governmentintervention 1s unneeded
6 savmg and investment are not always equal
In the derivation of the LM curve, lower income causes
A. no shift of either the money demand curve or LM c
B. a leftward shift of the LM curve.
C. a rightward shift of the LM curve. a leftward shift of the money demand curVe.
E. a rightward shift of the money demand curve.
A macroeconomic model in Wthh the interest rate IS an exogenous variable and income IS an
endogenous variable is the:
A. Amos c0re1periphery model.
B. Solow growth model.
(g?) IS curve.
. LM curve.
B. money market.
In the IS—LM model, contractionary fiscal policy results in in the interest rate and
in production.
A. an increase, a decrease
B. an increase, an increase 7' 1..
C. no change, no change .3 a decrease, a decrease  :
E. a decrease, an increase £5 N ...
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