Answer the following questions within the framework of the IS model discussed in the lectures. Unless otherwise stated, assume that C = c +b (Y-T) and 1 = g. -gir. Tick the correct alternative(s); more than one may be correct. For all questions involving an exogenous change, assume that the only exogenous change is the one specified in the question. 1. 2. N 3. 4. Which of the following should be multiplied by the multiplier to get the shift in the IS curve? (a) (b) (c) (d) Because of a change in tastes, desired consumption changes by 100. Because of a change in income, desired consumption changes by 100. Because of a change in tastes, desired saving changes by 100. Because of a change in tastes, there is an increase in the purchase of bonds of 100. A shift in the IS curve can occur for the following reasons (a) A change in expectations affecting desired investment. (b) A change in tastes affecting desired consumption. (C) A change in the rate of interest affecting desired investment. (d) (e) (a) (b) (C) (d) A change in real income affecting desired consumption. A change in the price level. Assume consumption is independent of income. Then There is no IS curve. The multiplier is unity. A change in investment will have no effect on income. The IS curve is downward sloping. If investment is independent of the rate of interest but does depend on real income (a) There is no IS curve. (b) The IS curve is perfectly elastic (i.e. flat). (c) The IS curve is perfectly inelastic (i.e. vertical). (d) A change in the rate of interest will have no effect on real income.