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Home  arrow Student Resources  arrow Chapter 18: The Relationship between the Money and Goods Markets  arrow Multiple choice questions

Multiple choice questions

Try the multiple choice questions below to test your knowledge of this chapter. Once you have completed the test, click on 'Submit Answers for Grading' to get your results.

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This activity contains 20 questions.

Question 1.
The chain of events that results from an expansionary monetary policy is:

 
End of Question 1


Question 2.
The equilibrium level of aggregate output is determined in:

 
End of Question 2


Question 3.
The interest rate is determined in:

 
End of Question 3


Question 4.
An increase in the money supply aimed at increasing aggregate output is referred to as:

 
End of Question 4


Question 5.
An example of an expansionary monetary policy is:

 
End of Question 5


Question 6.
The interest rate:

 
End of Question 6


Question 7.
If the investment demand curve is vertical:

 
End of Question 7


Question 8.
For the Central bank to keep the interest rate unchanged as the government increases spending, the Central Bank must continue to:

 
End of Question 8


Question 9.
If the Central bank tries to keep the interest rate constant when the economy is operating on the steep part of the AS curve, ________ will occur.

 
End of Question 9


Question 10.
According to the 'simple' Keynesian view, the aggregate supply curve is:

 
End of Question 10


Question 11.
The idea that government spending causes a reduction in private investment is called:

 
End of Question 11


Question 12.
The way in which government spending is supposed to reduce investment is by increasing:

 
End of Question 12


Question 13.
If the central bank increases the money supply at the same time as the government increases spending, it is suggested that investment will:

 
End of Question 13


Question 14.
If planned investment becomes more sensitive to interest rate changes, the crowding-out effect will:

 
End of Question 14


Question 15.
Each point on the IS curve represents the equilibrium point in the:

 
End of Question 15


Question 16.
The curve that illustrates the negative relationship between the equilibrium values of aggregate output and the interest rate in the goods market is the:

 
End of Question 16


Question 17.
The curve that illustrates the positive relationship between the equilibrium values of aggregate output and the interest rate in the money market is the:

 
End of Question 17


Question 18.
When the money supply increases:

 
End of Question 18


Question 19.
Each point on the LM curve represents the equilibrium point in the:

 
End of Question 19


Question 20.
Keynesians and monetarists differ over how steep the IS and LM curves actually are. Monetarists claim that the IS curve must be ___________ and the LM curve must be ____________.

 
End of Question 20





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