MACROECONOMICS (ONLY SELECT THE CORRECT OPTION)

Question 10

In the financial market, a decrease in income with simultaneous contractionary open market operations by the central bank ...

• A.is represented by a shift of the demand for money curve to the left and the money supply curve to the right.
• B.will result in an indeterminate impact on the interest rate.
• C.will result in an increase in the interest rate.
• D.will result in a decrease in the interest rate.

Question 11

The fully exogenous variables in the IS-LM model are ...

• A.investment spending and money supply.
• B.interest rate and government spending.
• C.government spending and money supply.
• D.government spending and investment spending.

Question 12

Which one of the following statements is INCORRECT regarding investment spending?

• A.In the IS-LM model, investment spending is only influenced by exogenous factors such as expectations, business confidence and regulations.
• B.The higher the interest rate, the higher the cost of borrowing will be and the higher the opportunity cost of own funds will be.
• C.Investment spending takes place when firms increase their spending on capital goods.
• D.There is a positive relationship between the level of output and income and the level of investment spending and a negative relationship between the interest rate and level of investment spending.

Question 13

In the IS-LM model, a decrease in taxes increases the demand for goods and the ...

• A.IS curve shifts to the right. The demand for money increases, and the interest rate rises and a movement along the LM curve takes place.
• B.IS curve shifts to the right. As taxes increases the supply of money increases and the LM curve shifts downwards.
• C.IS curve shifts to the left. The demand for money increases and the interest rate rises, causing the LM curve to shift upwards.
• D.IS curve shifts to the left. The demand for money decreases and the interest rate rises, causing the LM curve to shift upwards.

Question 14

An upward movement on an LM curve implies that as a result ...

• A.the money supply in the economy decreases causing the interest rate to increase.
• B.an increase in the level of output and income increases the demand for money and the interest rate increases.
• C.an increase in the level of output and income increases the money supply and the interest rate decreases.
• D.the money supply in the economy increases causing the level of output and income to increase.

Question 15

Which of the following statements is/are correct regarding the IS curve and the LM curve?

1. An increase in government spending will shift the IS curve to the right.

2. An increase in the interest rate will shift the LM curve upwards.

3. An increase in taxes will shift the IS curve to the right.

Question 16

Within the IS-LM model, which of the following policy actions will bring about an increase in the level of output and a decrease in the interest rate?

1. Expansionary fiscal policy.

2. An increase in the money supply.

3. Expansionary monetary policy.

• A.Only 3
• B.Only 2 and 3
• C.Only 2
• D.Only 1
• E.Only 1 and 2