SOLVED

1) The IS curve ________. A) shows the relationship between aggregate output and the real interest rate when the goods market is in equilibrium B) tells us that increases in autonomous consumption, investment, government purchases, or net exports raise output for any real interest rate C) tells us that a decrease in taxes leads to increases in output for any given real interest rate D) all of the above E) none of the above 2) In the IS curve ________. A) an increase in the interest rate constitutes an upward movement along the curve B) an increase in aggregate consumption constitutes a downward movement along the curve C) an increase in taxes constitutes a rightward shift of the curve D) all of the above E) none of the above 3) The IS curve ________. A) traces out the points at which the goods market is in equilibrium B) tells us how consumption expenditures fall as the real interest rises C) tells us that as the real interest rate rises planned expenditures go down leading to increases in savings that satisfy the goods market equilibrium D) all of the above E) none of the above 4) If aggregate output is below its equilibrium level ________. A) there is an excess demand for goods B) actual output is below planned expenditure C) firms will tend to replenish their low inventories driving output up toward equilibrium D) all of the above E) none of the above 5) If aggregate output is above its equilibrium level ________. A) there is an excess supply of goods B) actual output is below planned expenditure C) firms will tend to replenish their low inventories driving output up toward equilibrium D) all of the above E) none of the above 6) In the IS curve, if Y falls for any given level of the real interest rate ________. A) consumption decreases B) output increases C) saving increases D) all of the above E) none of the above 7) In the IS curve, if Y increases for any given level of the real interest rate ________. A) consumption increases B) output decreases C) saving decreases D) all of the above E) none of the above 8) In the IS curve, if Y falls for any given level of the real interest rate ________. A) consumption increases B) output increases C) saving increases D) all of the above E) none of the above 9) In the IS curve, a cut in taxes ________. A) causes planned expenditures and hence equilibrium output to rise when the interest rate increases B) causes planned expenditures and hence equilibrium output to fall when the interest rate increases C) causes the equilibrium interest rates to fall D) all of the above E) none of the above 10) The reason for the downward-sloping IS curve is that ________. A) lower interest rates lead to lower saving and lower output B) lower interest rates lead to lower saving and higher output C) higher interest rates lead to lower saving and higher output D) all of the above E) none of the above