1.A decrease in the money supply must cause which of the following?

Select one:

a. An increase in the interest rate and ambiguous effects on investment.

b. A decrease in investment and a leftward shift in the IS curve.

c. No change in output if investment is independent of the interest rate.

d. No change in the interest rate if investment is independent of the interest rate.

e. A downward shift in the LM curve.

2.Suppose the consumption equation is represented byC= 380+ 0.75Y_D. The multiplier in this economy is:

Select one:

a. 4.0.

b. 0.5.

c. 5.0.

d. 1.0.

e. 2.0.

3.A decrease in the marginal propensity to save from 0.42 to 0.13 will cause:

Select one:

a. the ZZ line to become flatter and a given change in autonomous spending (c₀) to have a smaller effect on output.

b. the ZZ line to become steeper and a given change in autonomous spending (c₀) to have no effect on output.

c. the ZZ line to become flatter and a given change in autonomous spending (c₀) to have a larger effect on output.

d. the ZZ line to become steeper and a given change in autonomous spending (c₀) to have a larger effect on output.

e. the ZZ line to become steeper and a given change in autonomous spending (c₀) to have a smaller effect on output.

4.Assume that investment does not depend on the interest rate. An increase in the money supply will cause which of the following for this economy?

Select one:

a. An increase in the interest rate.

b. No change in investment.

c. A decrease in output.

d. A decrease in investment.

e. An increase in investment.

5.Which of the following will cause a shift in the LM curve?

Select one:

a. An increase in output.

b. An increase in money supply.

c. An increase in firm confidence.

d. An increase in taxes.

e. An increase in the interest rate.