Multiple Choice
Identify the
choice that best completes the statement or answers the question.
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1.
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The IS-LM-BP model consists of all but one of the following functions:
a. | Equilibrium in the goods market | b. | Balance of payments | c. | Equilibrium in the
traded goods markets | d. | Equilibrium in the money
market |
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2.
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The slope of the ISXM schedule is
a. | steeper than the closed economy IS schedule. | b. | flatter than the
closed economy IS schedule. | c. | steeper than the LM curve. | d. | flatter than the LM
curve. |
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3.
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All of the following will shift the ISXM schedule except for:
a. | Increase in exports | c. | Fall in the real exchange rate | b. | Fall in marginal
propensity to import | d. | Level
of income |
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4.
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Following a real apreciation, all of the following will happen to the BT
schedule except for:
a. | Export function will shift downwards | b. | Import function will shift
upwards | c. | Marginal propensity to import will increase | d. | Level of income will
fall |
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5.
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Following a real depreciation,
a. | BT schedule will shift further than the ISXM schedule. | b. | ISXM will shift
further than the BT schedule. | c. | BT schedule will shift further than the LM
schedule. | d. | LM schedule will shift further than the BT schedule. |
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6.
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Fiscal policy is effective under which version of the IS-LM-BP model?
a. | Flexible exchange rate with perfect capital mobility | b. | Flexible exchange
rate with limited capital mobility and monetary accomodation | c. | Fixed exchange rate
with zero capital mobility | d. | Flexible exchange rate with zero capital
mobility |
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7.
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Monetary policy is effective under which version of the IS-LM-BP model?
a. | Flexible exchange rate with high capital mobility | b. | Fixed exchange rate
with high capital mobility | c. | Fixed exchange rate with limited capital
mobility | d. | Fixed exchange rate with zero capital mobility. |
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8.
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The Mundell-Fleming model is a version of the IS-LM-BP model with:
a. | Fixed exchange rates | c. | Perfect capital mobility | b. | Flexible exchange
rates | d. | Zero capital
mobility |
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9.
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Using the Mundell-Fleming model with floating exchange rates, which policy and
time horizon are effective?
a. | Monetary expansion in the short-run | c. | Fiscal expansion in the
short-run | b. | Monetary expansion in the long-run | d. | Fiscal expansion in the
long-run |
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10.
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Using the Mundell-Fleming model with fixed exchange rates, which of the
followings statements is not true?
a. | Fiscal expansion is ineffective in the short run but can increase the level of output
in the long run. | b. | Fiscal expansion is effective in the short run but not the long run in increasing the
level of output. | c. | The composition of income will change, with government spending crowding out net
exports. | d. | This is an important model for understanding monetary
unions. |
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