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| 1 | |
All of the following are types of monetary policy, except _______. |
| | A) | a nominal money stock target |
| | B) | a balanced budget |
| | C) | an inflation target |
| | D) | an interest rate rule |
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| 2 | |
If the central banks adjusts interest rates to maintain the quantity of money demanded in line with the given target for money supply, it is following a _________ target. |
| | A) | monetary |
| | B) | fiscal |
| | C) | supply side |
| | D) | classical |
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| 3 | |
The ___________ model enables us to consider combinations of income and interest rates that lead to equilibrium in the goods market and money market. |
| | A) | competitive |
| | B) | microeconomic |
| | C) | IS-LM |
| | D) | Aggregate demand |
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| 4 | |
Following a monetary target, the central bank adjusts ________________to maintain the _____________________in line with the given target for money .supply. |
| | A) | interest rates, quantity of money demanded |
| | B) | interest rates, consumer demand |
| | C) | inflation, quantity of money demanded |
| | D) | inflation, consumer demand |
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| 5 | |
The slope of the ____schedule reflects the sensitivity of aggregate demand to interest rates. |
| | A) | demand |
| | B) | LM |
| | C) | IS |
| | D) | Supply |
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| 6 | |
A reduction in the target money supply shifts the LM schedule to the ____, leading to ______ interest rates but lower output. |
| | A) | left, lower |
| | B) | left, higher |
| | C) | right, lower |
| | D) | right, higher |
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| 7 | |
Demand management uses monetary and fiscal policy to stabilize output near potential output. |
| | A) | True |
| | B) | False |
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| 8 | |
A mix of easy fiscal policy and tight monetary policy implies government spending is a ____ share of national income but private spending a ____ share. |
| | A) | small, big |
| | B) | small, small |
| | C) | big, small |
| | D) | big, big |
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| 9 | |
Easy monetary policy and easy fiscal policy together are highly |
| | A) | contractionary |
| | B) | stabilizing |
| | C) | retrograde |
| | D) | expansionary |
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| 10 | |
Government solvency requires that the present value of the current and future tax revenue is less than the present value of current and future spending plus any initial net debts. |
| | A) | True |
| | B) | False |
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| 11 | |
In the short run, when the economy is in recession, fiscal expansion increases _____ monetary expansion leads to lower __________. |
| | A) | output, interest rates |
| | B) | interest rates, output |
| | C) | unemployment, prices |
| | D) | prices, unemployment |
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| 12 | |
The intersection of the IS schedule and LM schedule represents equilibrium in the goods and money markets. |
| | A) | True |
| | B) | False |
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| 13 | |
An increase in government spending has a greater crowding out effect on private sector spending ___________. |
| | A) | the less elastic the demand for money is |
| | B) | the more elastic the demand for money is |
| | C) | the less interest sensitive investment spending is |
| | D) | the more flexible prices are |
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| 14 | |
A schedule which shows combinations of interest rates and output compatible with short-run equilibrium in the goods market is known as ____________. |
| | A) | aggregate demand |
| | B) | the LM schedule |
| | C) | the IS schedule |
| | D) | the investment demand schedule |
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| 15 | |
In the LM schedule, __________ interest rates are associated with __________ output. |
| | A) | higher, lower |
| | B) | lower, higher |
| | C) | higher, higher |
| | D) | lower, lower |
| | E) | a and b |
| | F) | c and d |
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| 16 | |
A fiscal contraction, other things equal, shifts the IS schedule to the ___________, resulting in _________ income and ___________ interest rates. |
| | A) | left, lower, lower |
| | B) | left, higher, higher |
| | C) | right, lower, lower |
| | D) | right, higher, higher |
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| 17 | |
If fiscal policy is unaltered, and monetary policy has achieved a reduction in interest rates and an increase in income, we can deduce that the LM schedule has ___________. |
| | A) | shifted to the left |
| | B) | shifted to the right |
| | C) | not moved |
| | D) | changed slope |
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| 18 | |
An increase in government spending will stimulate private spending by causing a reduction in interest rates. |
| | A) | True |
| | B) | False |
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| 19 | |
If people do not spend tax cuts because they expect to have to pay it back in the future they are exhibiting the principle of ____________. |
| | A) | risk aversion |
| | B) | crowding out |
| | C) | fiscal contraction |
| | D) | Ricardian equivalence |
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| 20 | |
A mixture of tight fiscal policy and easy monetary policy implies relatively high share of ____________ and a low share of ______________. |
| | A) | public sector investment, private sector investment |
| | B) | public sector consumption, private sector consumption |
| | C) | public sector employment, private sector employment |
| | D) | private sector investment, public sector investment |
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