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22.4 Understanding the IS Curve
If the interest rate falls, other things being equal, investment spending will ____.
A) fall
B) rise
C) either rise, fall, or remain unchanged
D) not be affected
Answer: B
Diff: 2 Type: MC Page Ref: 547
Skill: Recall
Objective List: 22.1 Utilize the Keynesian cross model for the determination of aggregate output
When the interest rate rises, ____.
A) planned investment falls
B) planned investment rises
C) planned investment will be unaffected
D) equilibrium income increases
Answer: A
Diff: 2 Type: MC Page Ref: 547
Skill: Recall
Objective List: 22.1 Utilize the Keynesian cross model for the determination of aggregate output
When the interest rate is ____, ____ investments in physical capital will earn more
than the cost of borrowed funds, so planned investment spending is ____.
A) high; few; high
B) high; few; low
C) low; few; high
D) low; many; low
E) high; many; high
Answer: B
Diff: 2 Type: MC Page Ref: 547 - 548
Skill: Recall
Objective List: 22.1 Utilize the Keynesian cross model for the determination of aggregate output
When interest rates rise in the United States (with the price level fixed), the value of the dollar
____, domestic goods become ____ expensive, and net exports ____.
A) falls; less; fall
B) falls; more; rise
C) rises; more; fall
D) rises; less; fall
Answer: C
Diff: 2 Type: MC Page Ref: 547 - 548
Skill: Recall
Objective List: 22.1 Utilize the Keynesian cross model for the determination of aggregate output