Question 1

Explain the determinants of aggregate private spending.

Accepted Answer

Aggregate private spending,A,e...

Question 2

Rational expectations assumes that individuals

Accepted Answer

A)  can accurately predict the future.
B)  make predictions based on the past behavior of the economy.
C)  form their predictions of macroeconomic variables randomly.
D)  have perfect foresight.
E)   none of the aboveF) A) and B)
G) C) and D)

Question 3

Explain what effect a reduction in future expected output will have on the IS curve and LM curve in the current period.

Accepted Answer

A reduction in Yᵉ will cause human wealt...

Question 4

Suppose there is a fiscal expansion in the current period.This fiscal expansion will tend to cause a smaller increase in current output when

Accepted Answer

A)  an increase in current output causes an increase in expected future output.
B)  an increase in the current interest rate causes expectations of expansionary monetary policy in the future.
C)  an increase in the current interest rate causes an increase in expected future interest rates.
D)  both A and B
E)   all of the aboveF) A) and B)
G) A) and E)

Question 5

Assume individuals consider only the short-run effects of changes in future macro variables when forming expectations of future output and future interest rates.A permanent increase in the money supply,with no other policy change implemented or anticipated,will most likely cause

Accepted Answer

A)  an increase in the current interest rate.
B)  an increase in future output and an increase in the future interest rate.
C)  an unknown effect on the current interest rate.
D)  all of the above
E)   none of the aboveF) A) and B)
G) A) and E)

Question 6

"Animal spirits" refers to

Accepted Answer

A)  the stubborn refusal of many economic decision-makers to use rational expectations.
B)  movements in investment that cannot be explained by changes in current variables.
C)  the often-observed Fed refusal to cooperate with the government in setting its monetary policy.
D)  the impact of tax-evasion on the budget deficit.
E)   an exotic alcoholic drink favored by Wall Street traders.F) D) and E)
G) B) and D)

Question 7

Suppose there is an increase in expected future output.This will cause which of the following to occur?

Accepted Answer

A)  the IS curve to shift left in the current period
B)  the IS curve to shift right in the current period
C)  the LM curve to shift up in the current period
D)  the LM curve to shift down in the current periodE) B) and D)
F) A) and B)

Question 8

The IS curve becomes steeper when

Accepted Answer

A)  government spending is relatively small.
B)  the income tax rate in the current period is relatively small.
C)  current changes in the real interest rate cause large changes in current real output.
D)  changes in the current real interest rate cause small changes in current demand.
E)   none of the aboveF) C) and D)
G) A) and B)

Question 9

Explain what effect an increase in future expected output will have on the IS curve and LM curve in the current period.

Accepted Answer

An increase in Yᵉ will cause human wealt...

Question 10

A change in which of the following variables will cause a shift of the IS curve in the current period?

Accepted Answer

A)  the current interest rate
B)  current output
C)  current taxes
D)  all of the above
E)   none of the aboveF) A) and B)
G) All of the above

Exam 16: Expectations, output, and Policy

Explain the determinants of aggregate private spending.

Correct Answer
verified
Aggregate private spending,A,e...
View Answer

Explain what effect a reduction in future expected output will have on the IS curve and LM curve in the current period.

Correct Answer
verified
A reduction in Yᵉ will cause human wealt...
View Answer

The IS curve becomes steeper when

Correct Answer
verified

Explain what effect an increase in future expected output will have on the IS curve and LM curve in the current period.

Correct Answer
verified
An increase in Yᵉ will cause human wealt...
View Answer

Suppose there is an increase in expected future output.This will cause which of the following to occur?

Correct Answer
verified

A change in which of the following variables will cause a shift of the IS curve in the current period?

Correct Answer
verified

Assume individuals consider only the short-run effects of changes in future macro variables when forming expectations of future output and future interest rates.A permanent increase in the money supply,with no other policy change implemented or anticipated,will most likely cause

Correct Answer
verified

Rational expectations assumes that individuals

Correct Answer
verified

"Animal spirits" refers to

Correct Answer
verified

Suppose there is a fiscal expansion in the current period.This fiscal expansion will tend to cause a smaller increase in current output when

Correct Answer
verified

Exam 16: Expectations, output, and Policy

Explain the determinants of aggregate private spending.

Correct AnswerverifiedAggregate private spending,A,e...View AnswerShow Answer

Explain what effect a reduction in future expected output will have on the IS curve and LM curve in the current period.

Correct AnswerverifiedA reduction in Yᵉ will cause human wealt...View AnswerShow Answer

The IS curve becomes steeper when

Correct AnswerverifiedShow Answer

Explain what effect an increase in future expected output will have on the IS curve and LM curve in the current period.

Correct AnswerverifiedAn increase in Yᵉ will cause human wealt...View AnswerShow Answer

Suppose there is an increase in expected future output.This will cause which of the following to occur?

Correct AnswerverifiedShow Answer

A change in which of the following variables will cause a shift of the IS curve in the current period?

Correct AnswerverifiedShow Answer

Assume individuals consider only the short-run effects of changes in future macro variables when forming expectations of future output and future interest rates.A permanent increase in the money supply,with no other policy change implemented or anticipated,will most likely cause

Correct AnswerverifiedShow Answer

Rational expectations assumes that individuals

Correct AnswerverifiedShow Answer

"Animal spirits" refers to

Correct AnswerverifiedShow Answer

Suppose there is a fiscal expansion in the current period.This fiscal expansion will tend to cause a smaller increase in current output when

Correct AnswerverifiedShow Answer

Correct Answer
verified
Aggregate private spending,A,e...
View Answer

Correct Answer
verified
A reduction in Yᵉ will cause human wealt...
View Answer

Correct Answer
verified

Correct Answer
verified
An increase in Yᵉ will cause human wealt...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified