1) Which of the following would cause a shift in the IS curve?

A) A change in the Marginal Propensity to Consume (MPC).

B) An increase in the expected rate of inflation.

C) Changes in money supply.

D) An increase in consumer confidence.

E) A decrease in taxes.

2) If the domestic interest rate is _____________ than the foreign interest rate, this will result in a capital _____________, creating a _____________ in the _____________ account.

A) more; inflow; surplus; capital

B) more; outflow; deficit; capital

C) less; inflow; surplus; capital

D) less; outflow; deficit; current

E) more; inflow; surplus; current

An increase in national income _____________ money _____________ and _____________ the equilibrium interest rate.

A) increases; demand; increases

B) increases; supply; decreases

C) decreases; demand; increases

D) decreases; supply; decrease

E) decreases; supply; increase

In the case of a liquidity trap, the _____________ curve is _____________, and the demand for money curve is _____________.

A) IS; horizontal; horizontal

B) IS; horizontal; vertical

C) LM; horizontal; vertical

D) LM; horizontal; horizontal

E) LM; vertical; vertical

There is a(n) _____________ relationship between national income and interest rates in the money market, and a(n) _____________ relationship between these two variables in the commodity market.

A) inverse; positive

B) inverse; inverse

C) positive; positive

D) positive; inverse

E) none of the above

A decrease in taxes shifts the IS curve to the _____________, leading to a(n) _____________ in output and a(n) _____________ in the interest rate.

A) right; increase; increase

B) right; increase; decrease

C) right; decrease; increase

D) left; increase; increase

E) left; decrease; decrease

An increase in the money supply shifts the LM curve to the _____________, leading to a(n) _____________ in output and a(n) _____________ in the interest rate.

A) right; increase; increase

B) right; decrease; increase

C) right; increase; decrease

D) left; increase; increase

E) left; decrease; decrease

The income that residents in the United States receive from their foreign investments is registered as a _____________.

A) credit in the current account only

B) credit in the capital account only

C) debit in the current account only

D) debit in the capital account only

E) debit in the current account and a credit in the capital account

Which of the following would be registered as a debit on the current account of the United States' Balance of Payments?

A) A broadcasting company from the United States sells its programming to Brazil.

B) The U.S. military spends money to maintain its bases overseas.

C) A manufacturing company in the United States has to pay dividends to foreign shareholders.

D) Mexican farms buy equipment from a U.S. company that manufactures farm equipment.

E) Foreign tourists spend money in New York.

Which of the following would most likely cause an appreciation of the U.S. dollar against other currencies?

A) There is a decline in the value of U.S. exports overseas.

B) There is an increase in the value of U.S. exports overseas.

C) The Federal Reserve announces that it will increase interest rates.

D) The Federal Reserve announces that it will decrease interest rates.

E) None of the above.