This pack of ECO 316 Week 4 Chapter 24 Linking the Financial System and the Economy The IS-LM-FE Model contains:<\/b><\/p>\n
24.1 Multiple Choice Questions<\/p>\n
1) Why did the Fed cut interest rates in late 1991?<\/p>\n
2) Why did the Fed cut interest rates in late 1998?<\/p>\n
3) A general equilibrium is an outcome in which<\/p>\n
4) The money market includes trade in<\/p>\n
5) Purchases and sales of stocks, bonds, and houses take place<\/p>\n
6) In macroeconomic models, Y typically represents<\/p>\n
7) In macroeconomic models, Y stands for<\/p>\n
8) An increase in the expected profitability of investment will cause<\/p>\n
9) A closed economy is one in which<\/p>\n
10) In a closed economy, the total quantity of goods demanded equals the sum of<\/p>\n
11) In a closed economy, the goods market is in equilibrium when<\/p>\n
12) In a closed economy, if the goods market is in equilibrium, national saving is $2 trillion, national consumption is $7 trillion, and government purchases are $2.5 trillion, then GDP equals<\/p>\n
13) In a closed economy, national saving equals<\/p>\n
14) For the goods market to be in equilibrium in a closed economy, which of the following must be true?<\/p>\n
15) Which of the following is NOT a key factor in determining household saving?<\/p>\n
16) An increase in the expected real interest rate will have a<\/p>\n
17) An increase in government purchases reduces national saving as long as<\/p>\n
18) Evidence suggests that when government purchases rise<\/p>\n
19) An increase in the real interest rate will<\/p>\n
20) In the saving-investment diagram, an increase in output will lead to<\/p>\n
21) In the savings-investment diagram, we know that an increase in the real interest rate raises the level of saving because<\/p>\n
22) The IS curve depicts the relationship between<\/p>\n
23) In a move down the IS curve,<\/p>\n
24) In a move up the IS curve,<\/p>\n
25) At points not on the IS curve,<\/p>\n
26) At a point above the IS curve,<\/p>\n
27) At a point below the IS curve,<\/p>\n
28) At a point below the IS curve,<\/p>\n
29) In an open economy,<\/p>\n
30) In a large open economy,<\/p>\n
31) In comparison with a closed economy, in a large open economy<\/p>\n
32) In a large open economy, the real interest rate does not have to fall by as much in order to restore equilibrium in the goods market in response to an increase in domestic output because<\/p>\n
33) Studies have shown that the degree of international mobility of savings among the United States, Japan, and many European countries<\/p>\n
34) The IS curve for a small open economy is<\/p>\n
35) With respect to the IS curve for a small open economy<\/p>\n
36) Which of the following would NOT cause a shift in the IS curve?<\/p>\n
37) Which of the following would NOT cause the IS curve to shift to the left?<\/p>\n
38) The level of full employment output<\/p>\n
39) During the first Gulf War<\/p>\n
40) The intersection of the IS curve and the FE line<\/p>\n
41) The FE line would be shifted to the right by<\/p>\n
42) Full-employment output can increase for all of the following reasons EXCEPT<\/p>\n
43) An unexpected decrease in oil prices would<\/p>\n
44) Which of the following equations correctly describes equilibrium in the two asset markets?<\/p>\n
45) If the demand for nonmoney assets exceeds the supply of nonmoney assets, the demand for money<\/p>\n
46) If the money market is in equilibrium<\/p>\n
47) A change in the inflation rate will<\/p>\n
48) Which of the following is the correct expression for the nominal market interest rate?<\/p>\n
49) A decline in real output causes the demand for real balances<\/p>\n
50) An increase in real output causes the demand for real balances<\/p>\n
51) The LM curve is the combinations of<\/p>\n
52) The LM curve slopes upward to the right because<\/p>\n
53) The slope of the LM curve is determined by<\/p>\n
54) If the demand for money is highly sensitive to the interest rate,<\/p>\n
55) When the interest sensitivity of the demand for real money balances is low,<\/p>\n
56) If the demand for real money balances were completely insensitive to the opportunity cost of holding money,<\/p>\n
57) If the demand for real money balances were infinitely sensitive to the interest rate,<\/p>\n
58) At any point along the LM curve,<\/p>\n
59) At a point above the LM curve,<\/p>\n
60) At a point below the LM curve,<\/p>\n
61) At a point above the LM curve,<\/p>\n
62) Which of the following will NOT cause the LM curve to shift?<\/p>\n
63) An increase in the supply of real money balances will cause<\/p>\n
64) In the short run, an increase in the money supply will lead to<\/p>\n
65) In general equilibrium, an increase in the money supply leads to<\/p>\n
66) Which is true concerning the effect of an increase in the money supply compared to general equilibrium?<\/p>\n
67) Following a decline in the quantity of real money balances supplied, equilibrium is restored in the money market by<\/p>\n
68) An increase in the price level<\/p>\n
69) A drop in the interest paid on checkable deposits will<\/p>\n
70) An increase in the nominal return on money<\/p>\n
71) An increase in expected inflation will<\/p>\n
72) Which of the following will NOT cause the LM curve to shift to the left?<\/p>\n
73) If GDP exceeds its full-employment level in the short run, what will take place to restore general equilibrium?<\/p>\n
74) When the economy is out of general equilibrium, which curve will adjust to restore general equilibrium?<\/p>\n
75) Which of the following does NOT necessarily hold when the economy is in long-run equilibrium?<\/p>\n
76) A cut in the federal income tax will cause the IS curve to<\/p>\n
77) If government purchases decrease, the IS curve will<\/p>\n
78) An increase in labor productivity will cause the FE line to<\/p>\n
79) If the economy is in general equilibrium and the Fed reduces the money supply<\/p>\n
80) Economists generally believe that prices are<\/p>\n
81) In the long run, a permanent increase in government spending will<\/p>\n
82) A decline in expected inflation will likely lead to<\/p>\n
83) In a large open economy, an increase in government spending will lead in the long run to<\/p>\n
84) In the long run, a rightward shift of the FE line will result in<\/p>\n
85) In a large open economy, an increase in productivity will lead in the long run to<\/p>\n
86) In the long run, a permanent increase in the nominal money supply will<\/p>\n
87) The neutrality of money refers to<\/p>\n
88) Many economists believe that changes in the money supply<\/p>\n
89) When seeking to explain the low interest rates in 2005, the article “Excess Savings or Excess Liquidity?” makes the case that<\/p>\n
24.2 Essay Questions<\/p>\n
1) Suppose that George is dissatisfied with the proportion of his wealth that is held in money. Is he likely to be satisfied with his nonmoney asset holdings of savings in bonds and stocks?<\/p>\n
2) Suppose that computer hackers are able to steal the credit card numbers of a large number of people from the Internet. How is the LM curve likely to respond if the money supply doesn’t change?<\/p>\n
3) Analyze the effect of the rise of retailing on the Internet in terms of the long-run equilibrium in the IS-LM-FE model.<\/p>\n
4) Suppose that the Fed is concerned that a decline in investment spending by businesses is likely to take place. In order to offset the effects of the decline in investment spending, the Fed increases the nominal money supply. If the decline in investment spending does not take place, what will be the impact of the Fed’s action on the economy in the short run? What will be the impact of the Fed’s action in the long run?<\/p>\n","protected":false},"excerpt":{"rendered":"
This pack of ECO 316 Week 4 Chapter 24 Linking the Financial System and the Economy The IS-LM-FE Model contains: 24.1 Multiple Choice Questions 1) Why did the Fed cut interest rates in late 1991? 2) Why did the Fed Read More …<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-174151","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/174151","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/comments?post=174151"}],"version-history":[{"count":0,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/174151\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/media?parent=174151"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/categories?post=174151"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/tags?post=174151"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}