BADM 7200 Exam 2 Review Questions and Correct Answers Latest 2026/27 Update–
LSU
Started on Saturday,
State Finished
Completed on Saturday,
Time taken 1 hour 25 mins
Points 32.00/40.00
Grade 80.00 out of 100.00
Question 1
Incorrect 0.00 points out of 1.00
A rise in money demand will, according to the large open economy model with floating exchange rates,
lead to:
a. a rise in income and net exports.
b. a decrease in income and net exports.
c. an increase in net capital outflows and a fall in net exports.
d. a fall in net capital outflows and an increase in net exports.
The correct answer is:
a decrease in income and net exports.
Question 2
Correct 1.00 points out of 1.00
In the case of demand-pull inflation, other things being equal:
a. both the inflation rate and the unemployment rate fall.
b. both the inflation rate and the unemployment rate rise at the same time.
c. the unemployment rate rises but the inflation rate falls.
d. the inflation rate rises but the unemployment rate falls.
The correct answer is:
the inflation rate rises but the unemployment rate falls.
BADM 7200 Exam 2 LSU 2026
, Question 3
Correct 1.00 points out of 1.00
Along any given IS curve:
a. tax rates are fixed, but government spending varies.
b. government spending is fixed, but taxes vary.
c. both government spending and taxes are fixed.
d. both government spending and taxes vary.
The correct answer is:
both government spending and taxes are fixed.
Question 4
Correct 1.00 points out of 1.00
In the IS–LM model, a decrease in output would be the result of a :
a. decrease in money demand.
b. decrease in government purchases.
c. increase in the money supply.
d. decrease in taxes.
The correct answer is:
decrease in government purchases.
BADM 7200 Exam 2 LSU 2026
, Question 5
Correct 1.00 points out of 1.00
In a short-run model of a large open economy with a floating exchange rate, a fiscal contraction causes a
decrease in:
a. the money supply and an increase in income but has no effect on the exchange rate.
b. income, the interest rate, and net exports but a decrease in investment and in the exchange rate.
c. the exchange rate and a fall in net exports but has no effect on income.
d. income, the interest rate, and the exchange rate but an increase in investment and net exports.
The correct answer is:
income, the interest rate, and the exchange rate but an increase in investment and net exports.
Question 6
Correct 1.00 points out of 1.00
In the short run, with and upward sloping short-run aggregate supply (SRAS) curve, if the price level is less
than the expected price level, then in the long run the aggregate:
a. demand curve will shift rightward.
b. supply curve will shift leftward.
c. supply curve will shift rightward.
d. demand curve will shift leftward.
The correct answer is:
supply curve will shift rightward.
BADM 7200 Exam 2 LSU 2026
, Question 7
Correct 1.00 points out of 1.00
Advocates of the rational-expectations approach predict that a credible policy to lower inflation will result
in a loss of output that is than expected based on the sacrifice ratio.
a. larger
b. smaller
c. the same
d. sometimes larger and sometimes slower
The correct answer is:
smaller
Question 8
Correct 1.00 points out of 1.00
During the financial crisis of 2008–2009, many financial institutions stopped making loans even to
creditworthy customers, which could be represented in the IS–LM model as a :
a. contractionary shift in the LM curve.
b. expansionary shift in the LM curve.
c. expansionary shift in the IS curve.
d. contractionary shift in the IS curve.
The correct answer is:
contractionary shift in the IS curve.
BADM 7200 Exam 2 LSU 2026
LSU
Started on Saturday,
State Finished
Completed on Saturday,
Time taken 1 hour 25 mins
Points 32.00/40.00
Grade 80.00 out of 100.00
Question 1
Incorrect 0.00 points out of 1.00
A rise in money demand will, according to the large open economy model with floating exchange rates,
lead to:
a. a rise in income and net exports.
b. a decrease in income and net exports.
c. an increase in net capital outflows and a fall in net exports.
d. a fall in net capital outflows and an increase in net exports.
The correct answer is:
a decrease in income and net exports.
Question 2
Correct 1.00 points out of 1.00
In the case of demand-pull inflation, other things being equal:
a. both the inflation rate and the unemployment rate fall.
b. both the inflation rate and the unemployment rate rise at the same time.
c. the unemployment rate rises but the inflation rate falls.
d. the inflation rate rises but the unemployment rate falls.
The correct answer is:
the inflation rate rises but the unemployment rate falls.
BADM 7200 Exam 2 LSU 2026
, Question 3
Correct 1.00 points out of 1.00
Along any given IS curve:
a. tax rates are fixed, but government spending varies.
b. government spending is fixed, but taxes vary.
c. both government spending and taxes are fixed.
d. both government spending and taxes vary.
The correct answer is:
both government spending and taxes are fixed.
Question 4
Correct 1.00 points out of 1.00
In the IS–LM model, a decrease in output would be the result of a :
a. decrease in money demand.
b. decrease in government purchases.
c. increase in the money supply.
d. decrease in taxes.
The correct answer is:
decrease in government purchases.
BADM 7200 Exam 2 LSU 2026
, Question 5
Correct 1.00 points out of 1.00
In a short-run model of a large open economy with a floating exchange rate, a fiscal contraction causes a
decrease in:
a. the money supply and an increase in income but has no effect on the exchange rate.
b. income, the interest rate, and net exports but a decrease in investment and in the exchange rate.
c. the exchange rate and a fall in net exports but has no effect on income.
d. income, the interest rate, and the exchange rate but an increase in investment and net exports.
The correct answer is:
income, the interest rate, and the exchange rate but an increase in investment and net exports.
Question 6
Correct 1.00 points out of 1.00
In the short run, with and upward sloping short-run aggregate supply (SRAS) curve, if the price level is less
than the expected price level, then in the long run the aggregate:
a. demand curve will shift rightward.
b. supply curve will shift leftward.
c. supply curve will shift rightward.
d. demand curve will shift leftward.
The correct answer is:
supply curve will shift rightward.
BADM 7200 Exam 2 LSU 2026
, Question 7
Correct 1.00 points out of 1.00
Advocates of the rational-expectations approach predict that a credible policy to lower inflation will result
in a loss of output that is than expected based on the sacrifice ratio.
a. larger
b. smaller
c. the same
d. sometimes larger and sometimes slower
The correct answer is:
smaller
Question 8
Correct 1.00 points out of 1.00
During the financial crisis of 2008–2009, many financial institutions stopped making loans even to
creditworthy customers, which could be represented in the IS–LM model as a :
a. contractionary shift in the LM curve.
b. expansionary shift in the LM curve.
c. expansionary shift in the IS curve.
d. contractionary shift in the IS curve.
The correct answer is:
contractionary shift in the IS curve.
BADM 7200 Exam 2 LSU 2026
