Question

In: Economics

14) An increase in the money supply will cause an increase in which of the following...

14) An increase in the money supply will cause an increase in which of the following variables?

A) output

B) investment

C) consumption

D) all of the above

E) none of the above

15) An increase in the money supply must cause which of the following?

A) a leftward shift in the IS curve

B) a reduction in the interest rate and ambiguous effects on investment

C) an increase in investment and a rightward shift in the IS curve

D) no change in the interest rate if investment is independent of the interest rate

E) no change in output if investment is independent of the interest rate

16) An increase in consumer confidence will tend to cause which of the following to occur?

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

17) Assume that investment does not depend on the interest rate. A reduction in the money supply will cause which of the following for this economy?

A) no change in the interest rate

B) no change in output

C) a reduction in investment

D) an increase in investment

18) A reduction in the aggregate price level, P, will most 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

19) Which of the following best defines the IS 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

Solutions

Expert Solution

14) An increase in the money supply will cause an increase in which of the following variables

Solution: all of the above

Explanation: An increase in the money supply will cause an increase in output, investment and consumption

15) An increase in the money supply must cause which of the following?

Solution: no change in output if investment is independent of the interest rate

Explanation: An increase in the money supply will have no impact on output if investment is independent of the interest rate

16) An increase in consumer confidence will tend to cause which of the following to occur?

Solution: a rightward shift in the IS curve

Explanation: When consumers decide to save less then the spending increases and the IS curve shifts right

17) Assume that investment does not depend on the interest rate. A reduction in the money supply will cause which of the following for this economy?

Solution: no change in output

Explanation: An increase or decrease in the money supply will have no impact on output if investment is independent of the interest rate

18) A reduction in the aggregate price level, P, will most likely have which of the following effects?

Solution: a downward shift in the LM curve

Explanation: A fall in the aggregate price level results to downward shift of the LM curve

19) Which of the following best defines the IS curve?

Solution: the combinations of i and Y that maintain equilibrium in the goods market

Explanation: The investment/saving (IS) curve is the combinations of income-expenditure model that maintain equilibrium in the goods market

Rahul Sunny answered 1 year ago

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