Macro quiz
1. Suppose there is a policy mix of expansionary monetary policy and expansionary fiscal policy. This combination of policies must cause:
a.
an increase in the interest rate (i)
b.
a reduction in i
c.
an increase in output (Y)
d.
a reduction in Y
2. Suppose the consumption equation is represented by the following: C = 100 + .75(Y-T). The multiplier in this economy is ________.
a.
0.25
b.
2
c.
4
d.
1.33
3. Suppose the public only hold currency (i.e. there are no banks). The demand for money is given by
Money demand = $Y(0.4 – i)
The nominal income is $100 and interest rate is held fixed by the central bank at 10% (or 0.1). Starting from the initial equilibrium suppose nominal income increases to $125. The increase in income will require the central bank to increase the supply of money from ________ to ________ .
a.
100; 125
b.
300; 375
c.
30; 37.5
d.
40; 50
4. Use the following information to answer the question below.
C = 1000 + .8(Y-T)
I = 800
G = 1800
T = 1000
The equilibrium level of GDP for the above economy equals:
a.
10000
b.
14000
c.
16000
d.
20000
5. Suppose a bond offers to pay $1000 in one year and currently sells for $900. Given this information, we know that the interest rate on the bond is:
a.
9%.
b.
10%.
c.
11.1%
d.
90%
e.
110%
6. Suppose the economy is currently operating on both the LM curve and the IS 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
d.
financial markets are in equilibrium
e.
all of the above
7. The four components of national income are
A
consumption spending, savings, government purchases, net exports.
B
consumption spending, investment spending, government purchases, gross exports.
C
consumption spending, investment spending, tax revenue, net exports.
D
consumption spending, investment spending, government purchases, net exports.
8….