SectionC Flashcards
If the short-run aggregate supply curve is horizontal, an increase in union aggressiveness that pushes wages and prices up will result in ______ prices and ______ output in the short run.
higher; lower
lower; lower
higher; higher
lower; higher
lower; lower
When the Federal Reserve increases the money supply, at a given price level the amount of output demanded is ______ and the aggregate demand curve shifts ______.
lower; outward
greater; inward
lower; inward
greater; outward
greater; outward
In the Keynesian-cross model, actual expenditures differ from planned expenditures by the amount of:
liquidity preference.
real money balances.
unplanned inventory investment.
the government-purchases multiplier.
unplanned inventory investment
The IS and LM curves together generally determine:
the interest rate only.
income only.
both income and the interest rate.
income, the interest rate, and the price level.
Both income and the interest rate
When drawn on a graph with Y along the horizontal axis and PE along the vertical axis, the line showing planned expenditure rises to the:
right with a slope less than one.
left with a slope greater than one.
right with a slope greater than one.
left with a slope less than one.
right with a slope less than one
A variable that links the market for goods and services and the market for real money balances in the IS-LM model is the:
consumption function.
price level.
nominal money supply.
interest rate.
interest rate
In the Keynesian-cross model, a decrease in the interest rate ______ planned investment spending and ______ the equilibrium level of income.
increases; increases
decreases; decreases
increases; decreases
decreases; increases
increases; increases
the interest rate is above the equilibrium value, it would be most precise to say that:
the result is an increase in the demand for real balances.
the quantity of real balances supplied exceeds the quantity demanded.
the result is a decrease in the demand for real balances.
the quantity of real balances demanded exceeds the quantity supplied.
the quantity of real balances supplied exceeds the quantity demanded.
In the Keynesian-cross model, what adjusts to move the economy to equilibrium following a change in exogenous planned spending?
the price level
the interest rate
production
planned spending
production
A decrease in the price level, holding nominal money supply constant, will shift the LM curve:
upward and to the left.
downward and to the left.
downward and to the right.
upward and to the right.
downward and to the right
With the real money supply held constant, the theory of liquidity preference implies that a higher income level will be consistent with:
first a lower and then a higher interest rate.
a lower interest rate.
no change in the interest rate.
a higher interest rate.
a higher interest rate
Equilibrium levels of income and interest rates are ______ related in the goods and services market, and equilibrium levels of income and interest rates are ______ related in the market for real money balances.
positively; negatively
negatively; positively
positively; positively
negatively; negatively
negatively; positively
