Question

1) Equilibrium output will rise and the equilibrium interest rate will fall if : A) government...

1) Equilibrium output will rise and the equilibrium interest rate will fall if :

A) government spending increases B) net exports increase. C) there is an autonomous increase in money demand D) the Fed increases the money supply

2) In the IS/LM model

A) the money supply is always fixed B) consumptions expenditures are fixed C) the price level is fixed D) the level of real GDP is fixed

3)Changes in monetary policy shift the LM curve, while changes in fiscal policy shift the IS curve

True or False

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

1) D) the Fed increases the money supply
(As money supply is increased, LM curve shifts downward to the right which decreases the equilibrium interest rate and increases the equilibrium output with given IS curve.)

2) C) the price level is fixed
(Real money supply is taken in IS/LM model. Real money supply = money supply/Price level. Price level is taken to be exogenous so that any shift in LM curve is due to changes in the money supply.)

3) True
(Changes in fiscal policy means changes in government spending and taxes which shift the IS curve as it represents the equilibrium in good market. Change in monetary policy means change in money supply which shifts LM curve as LM curve represents equilibrium in money market.)

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
1- In Keynes’s underemployment model with fixed money wages, if there is an exogenous fall in...
1- In Keynes’s underemployment model with fixed money wages, if there is an exogenous fall in investment, the economy will settle at a lower price level leading to   a- a shift in the LM curve to the right and real wage to rise. b- a shift in the LM curve to the left and real wage to fall. c- a shift in the LM curve to the left and real wage to rise. d- a shift in the LM curve...
28- If autonomous spending rises, the expenditure equilibrium will rise by the increase in autonomous spending....
28- If autonomous spending rises, the expenditure equilibrium will rise by the increase in autonomous spending. the expenditure equilibrium will increase by the level of GDP times the expenditure multiplier. the expenditure equilibrium will fall by the increase in autonomous spending. the expenditure equilibrium will rise by the increase in autonomous spending multiplied by the expenditure multiplier. 31- An example of fiscal policy is an increase in autonomous spending by consumers. an increase in social security spending by the elderly....
Multiple questions: If Government spending decreases by $100, GDP will    a) increase by $500   b)...
Multiple questions: If Government spending decreases by $100, GDP will    a) increase by $500   b) fall by $500   c) fall by $400    d) increase by $900   e) fall by $900 If taxes increase by $100, GDP will    a) increase by $400   b) decrease by $400   c) rise by $500    d) fall by $600       e) not change Suppose that Congress reduced Government spending at the same time that the price of imported oil increased. This would...
1) Suppose the central bank pursues restrictive monetary policy. Then: a. The IS curve shifts right...
1) Suppose the central bank pursues restrictive monetary policy. Then: a. The IS curve shifts right b. The IS curve shifts left c. The LM curve shifts right d. The LM curve shifts left 2. Which of the following would not cause the IS curve to shift to the left? a. a decrease in government expenditures b. a decrease in the money supply c. an increase in the domestic price level d. an increase in taxes 3)Under fixed exchange rates,...
How can the Fed influence the location of the LM curve and the interest rate? To...
How can the Fed influence the location of the LM curve and the interest rate? To help answer this question, assume that the demand for real balances is given by (1) (M/P)d = 0.5Q ‑40i and that money supply is initially fixed at (2) (M/P)s = 400. (since prices are fixed you may assume P=1). If money supply were increased to 500, and real output Q were constant at (3) Q = 1600, How would the intercept of the LM...
1. In a fixed exchange rate regime how might an increase in the money supply effect...
1. In a fixed exchange rate regime how might an increase in the money supply effect the economy? expansionary monetary policy has no effect on the economy other than depleting reserves the LM curve would shift right permanently decreasing interest rates and stimulating higher economic activity the IS curve shifts right creating jobs and economic growth the BP curve shifts up causing crisis in financial markets 2. Which of the following policy combinations represents countries in the European Union? little...
Consider the situation that the economy is not at its equilibrium output level. How would the...
Consider the situation that the economy is not at its equilibrium output level. How would the real GDP move without the intervention of monetary and fiscal policy?        A.The long-run aggregate supply curve would shift until a new potential GDP is reached.        B.It would go back to the original GDP level by moving along the short-run aggregate supply curve or aggregate demand curve.        C.Short-run aggregate supply curve would shift automatically until it reaches the original...
1. A cut in government spending, a decrease in income abroad, an increase in taxes, or...
1. A cut in government spending, a decrease in income abroad, an increase in taxes, or an expectation that future consumer income will fall will all cause aggregate: A) demand to shift rightward. B)demand to shift leftward. C)supply to shift rightward. D)supply to shift leftward. E) supply and aggregate demand to both shift equally inward. 2. A decrease in aggregate supply can result in: A) Unemployment B) demand- pull inflation C) prosperity D) cost- push inflation E) a recession 3.A...
1). Suppose in Pakistan the macroeconomic variables i* (foreign interest rate), P (domestic aggregate price level),...
1). Suppose in Pakistan the macroeconomic variables i* (foreign interest rate), P (domestic aggregate price level), P* (foreign aggregate price level), Y* (foreign income level), straight pie (domestic expected inflation), T (domestic net taxes), and G (domestic government spending) are exogenously given, the interest parity condition holds, and the expectations of the future economic trends remain unchanged. In this situation, if the foreign aggregate price level, P*, declines, the IS curve a. would not shift. b. would shift to the...
1.The Fed prefers to focus on the interest rate rather than growth in the money supply...
1.The Fed prefers to focus on the interest rate rather than growth in the money supply because a.it does not like to conduct open market operations. b.the money supply is too unpredictable. c.it makes inflation more predictable. d.money demand is too volatile. e.it is easier to fix the interest rate than maintain growth in the money supply. 2. Assume the Fed has complete control over the money supply. If the demand for money were greater than the supply of money,...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT