Question

24) An increase in government spending will likely have which of the following effects? A) a...

24) An increase in government spending will likely have which of the following effects?
A) a rightward shift in the IS curve
B) a leftward shift in the IS curve
C) an upward shift in the LM curve
D) a downward shift in the LM curve
25) If government spending and taxes increase by the same amount,
A) the IS curve does not shift
B) the IS curve shift leftward
C) the IS curve shifts rightward
D) the LM curve shifts downward
26) The IS curve will shift to the left when which of the following occurs?
A) a reduction in the money supply
B) a reduction in government spending
C) an increase in the interest rate
D) all of the above
E) none of the above
27) Which of the following occurs as the economy moves rightward along a given IS curve?
A) A reduction in the interest rate causes investment spending to decrease.
B) A reduction in the interest rate causes money demand to increase.
C) A reduction in the interest rate causes a reduction in the money supply.
D) An increase in government spending causes a reduction in demand for goods.
E) A reduction in taxes causes a reduction in demand for goods.

Homework Answers

Answer #1

24) (a) When the government expenditure increases or government adopts fiscal expansionary policy, the IS curve shifts to rightward.

25) (a) Since, the government has used balanced budget policy, the IS curve will not shift. In this case, the balanced budget multiplier will be equal to 1.

26) (b) Whenever, government uses contractionary fiscal policy (reduction in government spending or rise in taxes) the IS curve shifts to left.

27) (d) As the economy moves rightward along a given IS curve, interest rate rises and with a rise in interest rate, the demand for investment falls because there is an inverse relationship between interest rate and investment demand. So, the overall demand for goods falls.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
3) Which of the following occurs as the economy moves leftward along a given IS curve?...
3) Which of the following occurs as the economy moves leftward along a given IS curve? A) An increase in the interest rate causes investment spending to decrease. B) An increase in the interest rate causes money demand to increase. C) An increase in the interest rate causes a reduction in the money supply. D) A reduction in government spending causes a reduction in demand for goods. E) An increase in taxes causes a reduction in demand for goods. 5)...
20) Which of the following best defines the LM curve? A) the combinations of i and...
20) Which of the following best defines the LM curve? A) the combinations of i and Y that maintain equilibrium in the goods market B) illustrates the effects of changes in i on investment C) illustrates the effects of changes in i on desired money holdings by individuals D) the combinations of i and Y that maintain equilibrium in financial markets 21) Based on our understanding of the IS-LM model that takes into account dynamics, we know that a reduction...
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...
Which of the following will most likely increase long-run aggregate supply? a. an increase in the...
Which of the following will most likely increase long-run aggregate supply? a. an increase in the rate of investment b. an increase in resource prices c. an increase in the minimum wage d. an increase in the expected inflation rate Suppose the economy is initially in long-run equilibrium and then it experiences a supply shock in the form of sharply higher energy prices. Which of the following is true? a. The short-run aggregate supply curve shifts leftward and the long-run...
A reduction in the interest rate causes consumption and investment to _____, which shifts the aggregate...
A reduction in the interest rate causes consumption and investment to _____, which shifts the aggregate demand curve _____. a. rise; leftward b. rise; rightward c. fall; leftward d. fall; rightward
Suppose that the Fed makes a $100 billion open-market sale of Treasury bonds, and the money...
Suppose that the Fed makes a $100 billion open-market sale of Treasury bonds, and the money multiplier is 6. Which of the following impacts are most likely to result? a. The money supply shifts inward, and the equilibrium interest rate rises in the money market. b. The money supply shifts outward, and the equilibrium interest rate falls in the money market. c. Investment declines, causing the aggregate demand curve to shift leftward, reducing equilibrium real GDP and thus slowing the...
1. Suppose that the Fed makes a $100 billion open-market sale of Treasury bonds, and the...
1. Suppose that the Fed makes a $100 billion open-market sale of Treasury bonds, and the money multiplier is 6. Which of the following impacts are most likely to result? a. The money supply shifts inward, and the equilibrium interest rate rises in the money market. b. The money supply shifts outward, and the equilibrium interest rate falls in the money market. c. Investment declines, causing the aggregate demand curve to shift leftward, reducing equilibrium real GDP and thus slowing...
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...
QUESTION 19 In an economy with MPC = 0.8, and according to the goods market equilibrium...
QUESTION 19 In an economy with MPC = 0.8, and according to the goods market equilibrium equation in the IS-LM model, to increase (equilibrium) total output, Y, by 8, the government can: A. cut/lower the level of taxation, T, by 1. B. cut/lower the level of taxation, T, by 2. C. increase the level of taxation, T, by 2. D. none of the above. 10 points    QUESTION 20 Every point on an IS curve represents: A. a combination of...
In the short run, determine whether the following event causes a shift of a curve or...
In the short run, determine whether the following event causes a shift of a curve or a movement along a curve. Determine which curve is involved and the direction of the change. An increase in the quantity of money by the Federal Reserve increases the amount of money that people wish to lend, lowering interest rates. This results in a leftward shift of the aggregate demand curve. This results in a rightward shift of the aggregate demand curve. This results...