Posted: July 27th, 2023
.Suppose there is a policy mix of
Macro quiz
1.Suppose there is a policy mix of expansionary monetary policy
and expansionary fiscal policy. This combination of policies must cause:
a.
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an increase in the
interest rate (i)
b.
a reduction in i
c.
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an increase in output (Y)
d.
a reduction in Y
2.Suppose the consumption equation is represented by the
following: C = 100 + .75(Y-T). The multiplier in this economy is ________.
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a.
0.25
b.
2
c.
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4
d.
1.33
3.Suppose the public only hold currency (i.e. there are no banks).
The demand for money is given by
Money demand = $Y(0.4 - i)
The nominal income is $100
and interest rate is held fixed by the central bank at 10% (or 0.1). Starting
from the initial equilibrium suppose nominal income increases to $125. The
increase in income will require the central bank to increase the supply of
money from ________ to ________ .
a.
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100; 125
b.
300; 375
c.
30; 37.5
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d.
40; 50
4.Use the following information to answer the question below.
C = 1000 + .8(Y-T)
I = 800
G = 1800
T = 1000
The equilibrium level of
GDP for the above economy equals:
a.
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10000
b.
14000
c.
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16000
d.
20000
5.Suppose a bond offers to pay $1000 in one year and currently
sells for $900. Given this information, we know that the interest rate on the
bond is:
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a.
9%.
b.
10%.
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c.
11.1%
d.
90%
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e.
110%
6.Suppose the economy is currently operating on both the LM curve
and the IS curve. Given this information, we know that:
a.
the goods market is in
equilibrium
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b.
the bond market is in
equilibrium
c.
the money market is in
equilibrium
d.
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financial markets are in
equilibrium
e.
all of the above
7.The four components of national income are
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A
consumption spending,
savings, government purchases, net exports.
B
consumption spending,
investment spending, government purchases, gross exports.
C
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consumption spending,
investment spending, tax revenue, net exports.
D
consumption spending,
investment spending, government purchases, net exports.
8.When the central bank controls the interest rate, the aggregate
demand (AD) curve is downward sloping because:
a.a reduction in the money
supply (M) will cause an increase in the interest rate, a reduction in
investment, and a reduction in output.
b. a reduction in the
aggregate price level (P) will cause the central bank to reduce the interest
rate and thus increase output.
c. a reduction in P will
cause an increase in the real wage, a reduction in employment, and a reduction
in output.
d. as P increases, goods
and services become relatively more expensive and individuals respond by
reducing the quantity demanded of goods and services.
9.Suppose there is a reduction in the price of oil. This change in
the price of oil will cause which of the following in the short run?
a.
an increase in output
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b.
a reduction in the price
level
c.
a reduction in the
interest rate
d.
all of the above
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e.
none of the above
10.A reduction in the minimum wage will tend to
cause which of the following?
A
an upward shift in the
wage setting curve
B
a downward shift in the
wage setting curve
C
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an upward shift in the
price setting curve
D
a downward shift in the
price setting curve
d
none of the above
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