chapter 9 FINAL review - Assignment Essays

question

The IS curve shows the combinations of output and the real interest rate for which

answer

the goods market is in equilibrium.

question

Classical economists believe that in the short run,

answer

money neutrality exists and prices adjust rapidly.

question

A temporary adverse supply shock directly causes

answer

a shift to the left of the FE line.

question

A decline in expected future output would cause the IS curve to

answer

shift down and to the left.

question

A decline in the price of a bond causes the yield of the bond to

answer

rise

question

The IS-LM model predicts that a temporary beneficial supply shock

answer

increases output, national saving, and investment, but not the real interest rate.

question

Keynesian economists believe that in the short run,

answer

money neutrality does not exist and prices do not adjust rapidly.

question

An increase in wealth that doesn't affect labor supply would cause the IS curve to ________ and the FE line to ________.

answer

shift up and to the right; be unchanged

question

A decrease in money supply causes the real interest rate to ________ and the price level to ________ in general equilibrium.

answer

remain unchanged; fall

question

A rise in the price of a bond causes the yield of the bond to

answer

fall

question

After a temporary beneficial supply shock hits the economy, general equilibrium is restored by

answer

a shift down and to the right of the LM curve.

question

The aggregate supply curve shows the relation between

answer

the price level and the aggregate amount of output that firms supply.

question

An increase in investment spending would cause the FE line to

answer

remain unchanged.

question

An increase in the money supply would cause the FE line to

answer

.remain unchanged.

question

An increase in the money supply would cause the IS curve to

answer

remain unchanged.

question

A decrease in money supply causes the real interest rate to ________ and output to ________ in the short run, before prices adjust to restore equilibrium.

answer

rise;fall

question

Looking only at the asset market, an increase in output would cause

answer

an increase in the real interest rate along the LM curve.

question

Suppose the intersection of the IS and LM curves is to the right of the FE line. What would most likely eliminate a disequilibrium among the asset, labor, and goods markets?

answer

A rise in the price level, shifting the LM curve up and to the left

question

An increase in labor supply would cause the IS curve to

answer

remain unchanged.

question

The aggregate demand curve shows the combinations of output and the price level that put the economy on

answer

the IS curve and the LM curve.

question

Under monetary neutrality, an increase in the money supply causes output to ________ and the price level to ________.

answer

not change; rise

question

To reach general equilibrium, the price level adjusts to shift the ________ until it intersects with the ________.

answer

LM curve; FE line and IS curve

question

An increase in taxes (when Ricardian equivalence doesn't hold) causes the real interest rate to ________ and the price level to ________ in general equilibrium.

answer

fall;fall

question

A temporary decrease in government purchases causes the real interest rate to ________ and output to ________ in the short run, before prices adjust to restore equilibrium.

answer

fall;fall

question

A temporary decrease in government purchases causes the real interest rate to ________ and the price level to ________ in general equilibrium.

answer

fall;fall

question

A temporary supply shock, such as an increase in oil prices, would

answer

have no effect on the IS curve.

question

When all markets in the economy are simultaneously in equilibrium, we say

answer

there is a general equilibrium

question

Under an assumption of monetary neutrality, a change in the nominal money supply has

answer

a proportionate effect on the price leve

question

A change that increases the real money supply relative to real money demand causes

answer

the LM curve to shift down and to the right.

question

The LM curve

answer

slopes upward

question

The aggregate demand curve shows

answer

the relation between the aggregate quantity of goods demanded and the price level.

question

The FE line shows the level of output at which the ________ market is in equilibrium.

answer

Labor

question

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 ________.

answer

increase; up and to the right

question

Which of the following would shift the FE line to the right?

answer

An increase in labor supply

question

fter a temporary beneficial supply shock hits the economy, general equilibrium is restored by

answer

a shift down and to the right of the LM curve.

question

Suppose the intersection of the IS and LM curves is to the left of the FE line. What would most likely eliminate a disequilibrium among the asset, labor, and goods markets?

answer

A fall in the price level, shifting the LM curve down and to the right

question

The probable effect of introducing an increased number of automatic teller machines is to

answer

decrease money demand, shifting the LM curve down and to the right.

question

Banks decide to raise the interest rate they pay on checking accounts from 1% to 2%. This action would

answer

increase money demand, shifting the LM curve up and to the left.

question

You have just read that the Federal Reserve has increased the money supply to avoid a recession. For a given price level, you would expect the LM curve to

answer

shift down and to the right as the real money supply rises.

question

A temporary supply shock, such as a bumper crop, would

answer

.shift the FE line to the right and leave the IS curve unchanged.

1 of 40

question

The IS curve shows the combinations of output and the real interest rate for which

answer

the goods market is in equilibrium.

question

Classical economists believe that in the short run,

answer

money neutrality exists and prices adjust rapidly.

question

A temporary adverse supply shock directly causes

answer

a shift to the left of the FE line.

question

A decline in expected future output would cause the IS curve to

answer

shift down and to the left.

question

A decline in the price of a bond causes the yield of the bond to

answer

rise

question

The IS-LM model predicts that a temporary beneficial supply shock

answer

increases output, national saving, and investment, but not the real interest rate.

question

Keynesian economists believe that in the short run,

answer

money neutrality does not exist and prices do not adjust rapidly.

question

An increase in wealth that doesn't affect labor supply would cause the IS curve to ________ and the FE line to ________.

answer

shift up and to the right; be unchanged

question

A decrease in money supply causes the real interest rate to ________ and the price level to ________ in general equilibrium.

answer

remain unchanged; fall

question

A rise in the price of a bond causes the yield of the bond to

answer

fall

question

After a temporary beneficial supply shock hits the economy, general equilibrium is restored by

answer

a shift down and to the right of the LM curve.

question

The aggregate supply curve shows the relation between

answer

the price level and the aggregate amount of output that firms supply.

question

An increase in investment spending would cause the FE line to

answer

remain unchanged.

question

An increase in the money supply would cause the FE line to

answer

.remain unchanged.

question

An increase in the money supply would cause the IS curve to

answer

remain unchanged.

question

A decrease in money supply causes the real interest rate to ________ and output to ________ in the short run, before prices adjust to restore equilibrium.

answer

rise;fall

question

Looking only at the asset market, an increase in output would cause

answer

an increase in the real interest rate along the LM curve.

question

Suppose the intersection of the IS and LM curves is to the right of the FE line. What would most likely eliminate a disequilibrium among the asset, labor, and goods markets?

answer

A rise in the price level, shifting the LM curve up and to the left

question

An increase in labor supply would cause the IS curve to

answer

remain unchanged.

question

The aggregate demand curve shows the combinations of output and the price level that put the economy on

answer

the IS curve and the LM curve.

question

Under monetary neutrality, an increase in the money supply causes output to ________ and the price level to ________.

answer

not change; rise

question

To reach general equilibrium, the price level adjusts to shift the ________ until it intersects with the ________.

answer

LM curve; FE line and IS curve

question

An increase in taxes (when Ricardian equivalence doesn't hold) causes the real interest rate to ________ and the price level to ________ in general equilibrium.

answer

fall;fall

question

A temporary decrease in government purchases causes the real interest rate to ________ and output to ________ in the short run, before prices adjust to restore equilibrium.

answer

fall;fall

question

A temporary decrease in government purchases causes the real interest rate to ________ and the price level to ________ in general equilibrium.

answer

fall;fall

question

A temporary supply shock, such as an increase in oil prices, would

answer

have no effect on the IS curve.

question

When all markets in the economy are simultaneously in equilibrium, we say

answer

there is a general equilibrium

question

Under an assumption of monetary neutrality, a change in the nominal money supply has

answer

a proportionate effect on the price leve

question

A change that increases the real money supply relative to real money demand causes

answer

the LM curve to shift down and to the right.

question

The LM curve

answer

slopes upward

question

The aggregate demand curve shows

answer

the relation between the aggregate quantity of goods demanded and the price level.

question

The FE line shows the level of output at which the ________ market is in equilibrium.

answer

Labor

question

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 ________.

answer

increase; up and to the right

question

Which of the following would shift the FE line to the right?

answer

An increase in labor supply

question

fter a temporary beneficial supply shock hits the economy, general equilibrium is restored by

answer

a shift down and to the right of the LM curve.

question

Suppose the intersection of the IS and LM curves is to the left of the FE line. What would most likely eliminate a disequilibrium among the asset, labor, and goods markets?

answer

A fall in the price level, shifting the LM curve down and to the right

question

The probable effect of introducing an increased number of automatic teller machines is to

answer

decrease money demand, shifting the LM curve down and to the right.

question

Banks decide to raise the interest rate they pay on checking accounts from 1% to 2%. This action would

answer

increase money demand, shifting the LM curve up and to the left.

question

You have just read that the Federal Reserve has increased the money supply to avoid a recession. For a given price level, you would expect the LM curve to

answer

shift down and to the right as the real money supply rises.

question

A temporary supply shock, such as a bumper crop, would

answer

.shift the FE line to the right and leave the IS curve unchanged.

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