the economics of money, banking, and financial markets

719 $

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4. 
   

   Suppose the aggregate demand curve is given by Y= 12 - r then, if the nominal interest rate
   increases by 1 percent ____.
   A) aggregate output is unchanged
   B) aggregate output increases
   C) the nominal interest changes
   D) the real interest rate falls
   Answer: D
   Diff: 2 Type: MC Page Ref: 563
   Skill: Recall
   Objective List: 23.1 Apply the IS-MP framework for the determination of aggregate output and
   the interest rate

   
   


5. 
   

   Higher interest rates lead to reductions in the aggregate output due to ____.
   A) reductions in autonomous consumer expenditure
   B) reductions in planned investment expenditure
   C) higher expected inflation
   D) higher employment
   Answer: B
   Diff: 2 Type: MC Page Ref: 563
   Skill: Recall
   Objective List: 23.1 Apply the IS-MP framework for the determination of aggregate output and
   the interest rate

   
   


6. 
   

   An increase in autonomous consumer expenditure causes the IS curve to shift ____ and
   the aggregate demand curve to shift ____.
   A) left; left
   B) left; right
   C) right; left
   D) right; right
   Answer: A
   Diff: 2 Type: MC Page Ref: 564
   Skill: Applied
   Objective List: 23.1 Apply the IS-MP framework for the determination of aggregate output and
   the interest rate

   
   


7. 
   

   An increase in financial frictions causes the IS curve to shift ____ and the aggregate
   demand curve to shift ____.
   A) left; left
   B) left; right
   C) right; left
   D) right; right
   Answer: A
   Diff: 2 Type: MC Page Ref: 564
   Skill: Applied
   Objective List: 23.1 Apply the IS-MP framework for the determination of aggregate output and
   the interest rate