Question
Please help me with these multiple choice questions 1. Consider a closed economy model where =++, consumption is given by the function =100+0.9(), investment is
Please help me with these multiple choice questions
1. Consider a closed economy model where =++, consumption is given by the function =100+0.9(), investment is =100, government purchases are =70, and the government's budget is balanced. Which of the following is false?
a. Equilibrium disposable income is 2000.
b. Equilibrium GDP is 2070.
c. Autonomous spending is 210.
d. The multiplier is 10.
2. Which of the following statements is true?
a. In order to reduce the interest rate, the Reserve Bank conducts contractionary open market operations.
b. When interest rates fall, the price of bonds must fall.
c. Reducing the supply of money will lead to a rise in the interest rate.
d. An increase in money demand leads to a fall in the interest rate.
3. A fiscal contraction shifts the ______ curve to the left, leading to a(n) ______ in output. A monetary contraction shifts the ______ curve up, leading to a(n) ______ in output and ______ interest rates.
a. LM, increase, IS, increase, lower
b. IS, decrease, LM, increase, higher
c. LM, decrease, IS, decrease, higher
d. IS, decrease, LM, decrease, higher
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