1.If individuals do not hold current account deposits, we know that:

Select one:

a. c= 1.

b. H=

c. M=

d. The money multiplier is 1/c.

e. All of the above.

2.Suppose fiscal policy makers implement a policy to increase the size of a budget deficit. Based on the IS-LM model, we know with certainty that the following will occur as a result of this fiscal policy action:

Select one:

a. Output increases.

b. Investment spending decreases.

c. The price level increases.

d. Investment spending increases.

e. Output decreases.

3.Which of the following types of government spending is included when calculating GDP?

Select one:

a. Spending at the local level.

b. Spending at the state level.

c. Spending at the federal level.

d. All of the above

e. Only B and C.

4.An increase in the aggregate price level,P, will most likely have which of the following effects?

Select one:

a. A rightward shift in the IS curve.

b. A leftward shift in the IS curve.

c. An upward shift in the LM curve.

d. A downward shift in the LM curve.

e. A downward shift in the IS curve and an upward shift in the LM curve.

5.A decrease in taxes will cause:

Select one:

a. no change in investment.

b. a decrease in investment.

c. a decrease in autonomous spending.

d. an increase in investment.

e. no change in autonomous spending.