Question 1. [1 mark] We can expect the LM curve to get flatter as: A. money demand becomes less sensitive to changes in the interest rate. B. the marginal propensity to save increases. C. investment becomes more sensitive to changes in the interest rate. D. money demand becomes more sensitive to changes in the interest rate. E. money demand becomes more sensitive to changes in income. Question 2. [1 mark] In the Keynesian-Cross model, if autonomous investment increases by 100 and government transfers decrease by 100, which of the following is true? A. Income will increase by 100. B. Income will increase by the multiplier times 100. C. Income will not change. D. Income will decrease by the multiplier times 100. E. Income will increase, but we can't say by how much. Question 3. [1 mark] The IS curve will shift to the right when which of the following occurs? A. An increase in the money supply. B. An increase in government spending. C. A reduction in the interest rate. D. All of the above. E. None of the above. Question 4. [1 mark] In a classical model, an increase in government expenditure will lead to: A. an increase in output and price level. B. an increase in price level and interest rate. C. an increase in nominal wage and output remains unchanged. D. Both B and C are correct. E. None of the answers given here are correct