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macro95ex9

macro95ex9 - Chapter 9 The IS-LM/AD-AS Model A General...

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Chapter 9 The IS-LM/AD-AS Model: A General Framework for Macroeconomic Analysis T Multiple Choice Questions 1. The FE line shows the level of output at which the _____ market is in equilibrium. (a) Goods (b) Asset (c) Labor (d) Money Answer: C Level of difficulty: 1 Section: 9.1 2. The FE line is vertical because the level of output at full employment doesn’t depend on the (a) real wage rate. (b) level of employment. (c) marginal product of labor. (d) real interest rate. Answer: D Level of difficulty: 1 Section: 9.1 3. Which of the following would shift the FE line to the right? (a) An adverse supply shock (b) An increase in labor supply (c) A decrease in the capital stock (d) An increase in the future marginal productivity of capital Answer: B Level of difficulty: 1 Section: 9.1 4. Which of the following would shift the FE line to the left? (a) A beneficial supply shock (b) An increase in labor supply (c) A decrease in the capital stock (d) A decrease in the future marginal productivity of capital Answer: C Level of difficulty: 1 Section: 9.1

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Chapter 9 The IS-LM/AD-AS Model: A General Framework for Macroeconomic Analysis 133 5. The IS curve shows the combinations of output and the real interest rate for which (a) the goods market is in equilibrium. (b) the labor market is in equilibrium. (c) the financial asset market is in equilibrium. (d) an increase in output will cause the market-clearing interest rate to be bid up. Answer: A Level of difficulty: 1 Section: 9.1 6. An increase in the money supply would cause the FE line to (a) shift to the right. (b) shift to the left. (c) remain unchanged. (d) remain unchanged if Ricardian equivalence holds; otherwise, shift to the right. Answer: C Level of difficulty: 1 Section: 9.1 7. An adverse supply shock would cause the FE line to (a) shift to the right. (b) shift to the left. (c) remain unchanged. (d) remain unchanged if the shock is temporary; shift to the right if the shock is permanent. Answer: B Level of difficulty: 1 Section: 9.1 8. Any change that reduces desired saving relative to desired investment (for a given level of output) causes the real interest rate to _____ and shifts the IS curve _____. (a) increase; down and to the left (b) increase; up and to the right (c) decrease; down and to the left (d) decrease; up and to the right Answer: B Level of difficulty: 2 Section: 9.2 9. A decline in expected future output would cause the IS curve to (a) shift up and to the right. (b) shift down and to the left. (c) remain unchanged. (d) shift up and to the right only if people face borrowing constraints. Answer: B Level of difficulty: 1 Section: 9.2
134 Abel/Bernanke • Macroeconomics, Fifth Edition 10. A decrease in the effective tax rate on capital would cause the IS curve to (a) shift up and to the right. (b) shift down and to the left.

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macro95ex9 - Chapter 9 The IS-LM/AD-AS Model A General...

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