Question # 1

an asset that can easily be exchanged for goods and services is called a.

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Financial asset

Barter like asset

Illegitimate asset

Liquid asset

A decline in taxes __ consumer expenditure and shifts the _ curve shifts to the.

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Raises ; LM; Right

Lowers; IS ; left

raises ; IS; right

Lower ; LM; left

In the Keynesian cross diagram an increasing investment spending because companies become more optimistic about investment profitability causes the aggregate demand function to shift _____ and the equilibrium level of aggregate output to.

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up ; rise

up ; fall

down ;rise

down ; fall

A decrease iin money demand other thing equal shifts the _____ curve to the

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IS ; right

Is ; Left

LM ; Left

LM ; Rfight

The use of money is more efficient than barter because the introduction of money

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Reduces the need for economic specialization

Reduces the need to exchange goods

Reduce the need for other stores of value

Reduces transaction costs

Which policies are expenditure changing policies.

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Currency devaluation and revaluation

Import quotas and tariffs

Monetary and fiscal policy

Wage and price controls

Disposable income is obtained by subtracting ________ taxes from personal income

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Indirect taxes

Direct taxes

Subsidies

None

A monetary expansion is characterized by

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Rising output and interest rates

Rising output and falling interest rates.

Constant output and falling interest rates

Falling output and interest rates

As the interest sensitivity of money demand increases

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The multiplier term increases

Fiscal policy has a greater effect on output

Monetary policy has a smaller effect on output

All of the above

A tax cut __ disposable income _____ consumption expenditure and shifts the IS curve to the.

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Increases ; increases ; right

Increases ; decreases ; left

decreases ; increases ; left

decreases ; decreases ; right

When there is no change in central banking holding of international reserve balances a country's

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Trae balance always equals 0

Current account balance always equals 0

Capital account balance always equals 0

Balance of payments always equal 0

A decrease in autonomous consumer expenditure causes the equilibrium level of aggregate output to __________ at any given interest rate and shifts the _______ curve to the __________

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rise ; LM ;right

rise ; IS ; right

Fall ; LM ; left

rise ;IS; Left

Why do people keep currency in their pockets when bank deposits pay interest.

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Because banks might steal your money

Because currency is more liquid

Because bank deposits lose value due to inflation

Because bank deposits lose value due to exchange in interest rates.

A bank has excess liquidity reserves to lend but is unable to find a willing borrower these will_______ the size of the money multiplier.

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Reduce

Increase

Have no effect on

Double

Factors that cause the IS curve to shift include.

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Changes in autonomous consumer spending

Changes in government spending

Changes in investment spending related to business confidence

All of the above

In the Keynesian cross diagram an increasing investment spending because companies become more optimistic about investment profitability causes the aggregate demand function to shift ______ and the equilibrium level of aggregate output to rise and the IS curve to shift to the

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up ; right

up ; left

down ;left

down ; right

"The problem with monetarism is that its advocates have seen it as infallible over short periods of time and wish it to be rigid in its application over all periods of time "The advocates of monetarism wish it to the rigid in its application over all periods of time to.

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Weaken fiscal policy

Avoid monetary policy errors

Strengthen the impact of monetary policy

Ensure the independence of the central bank

When the central Bank ________ the money supply the LM curve shifts to the _______ interest rates ____________ and equilibrium aggregate output.

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Increase ; right ; fall; increase

increases ; left ; rise ; decrease

decreases ; left ;rise ; increases

decreases ; left ; fall ; increases

The equilibrium level of saving is.

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Rs.120

Rs.75

Rs.40

Rs.80

A decline in the money supply shifts the LM curve to the left causing the interest rate to ________ and output to___

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rise ; rise

rise ; fall

fall ; rise

fall ; fall

The near term effect of an unexpected sale of bonds by the central bank is.

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An increase in interest rates, a risen investment and a rise in GDP

An increase in interest rates a drop in investment and a drop in GDP

A decrease in interest rtes a rise in investment and a rise in GDP

A decrease in interesr rates a drop in investment and a drop in GDP

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