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1) The IS represents:
A) the single level of output where financial markets are in equilibrium.
B) the combinations of output and the interest rate where the money market is in equilibrium.
C) the combinations of output and the interest rate where the goods market is in equilibrium.
D) the single level of output where the goods market is in equilibrium.
E) the single level of output where both the goods market and the money market are in
equilibrium.
Answer: C
Diff: 1 Type: MC
Skill: Recall
Section Ref.: 5-1
2) The IS curve will shift to the left when which of the following occurs?
A) a reduction in taxes
B) an increase in interest rates
C) an increase in consumer confidence
D) an increase in taxes
E) an increase in government spending
Answer: D
Diff: 1 Type: MC
Skill: Recall
Section Ref.: 5-1
3) Which of the following occurs as the economy moves rightward along the IS curve?
A) A reduction in the interest rate causes investment spending to increase.
Copyright © 2015 Pearson Canada Inc. 5-1
Macroeconomics, 5ce
Chapter 5: Goods and Financial Markets: The IS-LM Model
4) The LM represents:
A) the single level of output where financial markets are in equilibrium.
B) the combinations of output and the interest rate where the money market is in equilibrium.
C) the combinations of output and the interest rate where the goods market is in equilibrium.
D) the single level of output where the goods market is in equilibrium.
E) the single level of output where both the goods market and the money market are in
equilibrium.
Answer: B
Diff: 1 Type: MC
Skill: Recall
Section Ref.: 5-2
6) Which of the following occurs as the economy moves rightward along the LM curve?
A) An increase in output causes an increase in money demand.
B) A reduction in the interest rate causes an increase in the money supply.
C) An increase in output causes an increase in demand for goods.
D) A reduction in the interest rate causes money demand to increase.
E) A reduction in the interest rate causes investment spending to increase.
Answer: A
Diff: 1 Type: MC
Skill: Recall
Section Ref.: 5-2
7) Suppose the economy is currently operating on both the LM curve and the IS curve. Given
this information, we know that:
A) only the goods market is in equilibrium.
B) only the money market is in equilibrium.
C) the bond market and financial markets are in equilibrium.
D) the goods market and the money market are in equilibrium.
E) the bond market and money market are in equilibrium.
Answer: D
Diff: 1 Type: MC
Skill: Recall
Section Ref.: 5-3
8) Suppose the economy is operating on the LM curve but not on the IS curve. Given this
information, we know that:
A) the money, bond and goods markets are all in equilibrium.
B) neither the money, bond, nor goods markets are in equilibrium.
C) the money market and bond markets are in equilibrium and the goods market is not in
equilibrium.
D) the goods market is in equilibrium and the money market is not in equilibrium.
E) the money market and goods market are in equilibrium but the bond market is not in
equilibrium.
Answer: C
Diff: 1 Type: MC
Skill: Recall
Section Ref.: 5-3
9) Suppose the economy is operating on neither the IS nor LM curve. Given this information, we
know that:
A) the goods market is in equilibrium.
B) the bond market is in equilibrium.
C) the money market is in equilibrium, but the goods market not is in equilibrium.
D) financial markets are in equilibrium, but the money market not is in equilibrium.
E) the goods market and the money market are not in equilibrium.
Answer: E
Diff: 1 Type: MC
Skill: Recall
Section Ref.: 5-3
12) An open market purchase of bonds will cause which of the following to occur?
A) The IS curve shifts rightward as the interest rate falls.
B) The LM curve shifts up.
C) The IS curve shifts leftward as the interest rate increases.
D) The LM curve shifts down.
E) The IS curve shifts rightward and the LM curve to remain the same.
Answer: D
Diff: 1 Type: MC
Skill: Recall
Section Ref.: 5-2
13) Based on our understanding of the IS-LM model, we know that a tax cut:
A) increases money demand and the interest rate.
B) must cause investment spending to increase.
C) could never affect investment spending.
D) must cause investment spending to decrease.
E) will reduce consumption and income.
Answer: A
Diff: 1 Type: MC
Skill: Applied
Section Ref.: 5-3
14) Suppose investment spending depends only on the interest rate and no longer depends on
output. Given this information, a reduction in government spending:
A) will cause investment to decrease.
B) will cause a reduction in output and have no effect on the interest rate.
C) will cause investment to increase.
D) will have no effect on investment.
E) will have no effect on output.
Answer: C
Diff: 2 Type: MC
Skill: Recall
Section Ref.: 5-1
Easedale Tarn, 24
Echenique, 6
Echo, the, 28, 35
Elgin Marbles, the, 109
Eliot, George, 11
Emerson, 11
English Illustrated Magazine, the, 40, 118, 257;
wood-engravings, 158-59;
literary contributors, 159-66
Engraving, renewed study of, 111
Erckmann-Chatrian, 230
Examiner, the, 36, 38, 46, 59
Hake, George, 64
Hall, Mrs., 147-48
Hall, Samuel Carter (“Mr. Pecksniff”), 146-49
Hallé, Sir Charles E., 89, 126, 132, 146
Hamerton, Philip, 149-50
Hamilton, Lady, 264
Hannen, Mr. Justice, the Parnell trial, 186-88
Harcourt, Sir William, 23, 180-81
Hare, Sir John, 233, 236, 259
Harrop Tarn, 21
Harte, Bret, 159, 223-24
Harwood, Mr., 7, 37-38
Hawtrey, Charles, 256
Haydon, 75
Haymarket Theatre, the, 257, 281-82
Henley, relations with Stevenson, 215, 218-19;
Irving and, 219-21
Henschell, 119
Herschell, Lord, 49, 55-56
Hertfordshire, 23
High White Stones, 24
Hill, Arthur, 3, 5, 6
Hill, Dr. Birkbeck, 6-8, 170
Hill, Sir Rowland, 3
His Majesty’s Theatre, 270
Holker, Lord Justice, 49, 54-55
Hollingshead, John, 232
Home Rule movement, the, 184-85
Hope, Beresford, 37
Horsman, Mr., 174-75
Horton, Miss Priscilla (Mrs. German Reed), 258
Houghton, Lord, 270-71
Howell, Charles, 141-42
Hughenden, 180-81
Hunt, Holman, 75, 111-13, 130
Huxley, Professor, 159
Hyde Park, 170
Ibsen, 208
Illustrated London News, the, 97
Indian Mutiny, 2-3
Inglis, Mr., 186
Inner Temple, 14
Irving, Sir Henry, 52, 83, 152, 196;
production of Becket, 195-96;
attack on Henley, 219-21;
anecdotes concerning, 221-23, 234-36;
Bob Gassett in Dearer than Life, 229;
in Fanchette, 230;
Digby Grant in The Two Roses, 230, 235-36;
in The Bells, 231-34, 239;
personality, 236-38, 241-43, 270-72;
in Hamlet, 239-41;
visit to Nuremberg, 243-44;
in Charles I., 254;
Ellen Terry and, 279-80;
his request to the author, 283-84
Italy, Northern, aspects of character in, 19
Ullswater, 15
Unitarian chapel, Great Portland Street, 167, 169
United States, quality of illustrations in, 159
Printed by R. R. C ,L , Edinburgh.
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