ECS2602
EXAM PACK
, lOMoARcPSD|21997160
ECS2602-24-S2 Welcome to the module ECS2602-24-S2 Assessment 2
QUIZ
Started on Tuesday, 27 August 2024, 3:24 PM
State Finished
Completed on Tuesday, 27 August 2024, 3:33 PM
Time taken 8 mins 57 secs
Marks 12.00/30.00
Grade 40.00 out of 100.00
Question1
Incorrect
Mark 0.00 out of 1.00
Which one of the following statements is INCORRECT?
Select one:
A. An increase in investors' con dence increases autonomous spending, and the IS This statement is
curve shifts to the right. correct.
B. An increase in investors' con dence increases autonomous investment, and therefore, an upward movement along
the IS curve occurs.
C. An increase in investors' con dence increases autonomous investment. Since a positive relationship exists
between investment and the level of output and income, the IS curve will shift to the right.
D. An increase in investors' con dence increases the level of output and income, and the IS curve shifts to the
right.
Your answer is incorrect.
The correct answer is:
An increase in investors' con dence increases autonomous investment, and therefore, an upward movement along the IS
curve occurs.
, lOMoARcPSD|21997160
Question2
Correct
Mark 1.00 out of 1.00
This question is based on the following comparison between the impact of an expansionary scal policy with a
contractionary monetary policy in the IS-LM model:
ExpansionaryContractionary
scal policy monetary policy
The demand for goods Higher Lower
The level of output and income Higher Lower
The interest rate Unchanged Higher
Investment spending Higher Lower
Money demand and the quantity of money Higher Lower
Budget de cit Higher Unchanged
The reason for the higher demand for goods and level of output and income for an expansionary scal policy is that
_____________ while for a contractionary monetary policy, it is lower since the _______________.
Select one:
A. investment spending is higher; interest rate is lower
B. government spending is higher; interest rate is higher
C. investment spending is lower; interest rate is higher
D. government spending is lower; interest rate is lower
Your answer is correct. To answer this type of question, you must use a chain of events. An expansionaryscal
policy means that government spending has to be increased and/or taxes have to be decreased. We use the
example of an increase in government spending :
Expansionary scal policy
Chain of events
Impact on the goods market
G↑→ Z↑→ Y↑
Y↑→ YD↑→ C↑
Y↑→ I↑
Impact on the nancial market
i =ἶ
Y↑→ Md↑→ M↑
The end result
, lOMoARcPSD|21997160
The end result is that at a given interest rate, the
increase in government spending leads to an increase
in the level of output and income.
If the IS-LM model represents this, the IS curve shifts
to the right.
A contractionary monetary policy implies an increase in the interest rate to cool down by decreasing the demand for
goods.
Contractionary monetary policy
Chain of events
Impact on the nancial market
MonetaryContraction →i ↑
i↑→ Md↓→ M↓
Impact on the goods market
i↑→ I↓→ Z↓→ Y↓
Y↓→ I↓
Y↓→ YD↓→ C↓
Back to the nancial market
Y↓→ Md↓→ M↓
The end result
The end result is that a contractionary monetary
policy results in a decrease in output and income
level.
If the IS-LM model presents this, the LM curve shifts
upwards.
The correct answer is:
EXAM PACK
, lOMoARcPSD|21997160
ECS2602-24-S2 Welcome to the module ECS2602-24-S2 Assessment 2
QUIZ
Started on Tuesday, 27 August 2024, 3:24 PM
State Finished
Completed on Tuesday, 27 August 2024, 3:33 PM
Time taken 8 mins 57 secs
Marks 12.00/30.00
Grade 40.00 out of 100.00
Question1
Incorrect
Mark 0.00 out of 1.00
Which one of the following statements is INCORRECT?
Select one:
A. An increase in investors' con dence increases autonomous spending, and the IS This statement is
curve shifts to the right. correct.
B. An increase in investors' con dence increases autonomous investment, and therefore, an upward movement along
the IS curve occurs.
C. An increase in investors' con dence increases autonomous investment. Since a positive relationship exists
between investment and the level of output and income, the IS curve will shift to the right.
D. An increase in investors' con dence increases the level of output and income, and the IS curve shifts to the
right.
Your answer is incorrect.
The correct answer is:
An increase in investors' con dence increases autonomous investment, and therefore, an upward movement along the IS
curve occurs.
, lOMoARcPSD|21997160
Question2
Correct
Mark 1.00 out of 1.00
This question is based on the following comparison between the impact of an expansionary scal policy with a
contractionary monetary policy in the IS-LM model:
ExpansionaryContractionary
scal policy monetary policy
The demand for goods Higher Lower
The level of output and income Higher Lower
The interest rate Unchanged Higher
Investment spending Higher Lower
Money demand and the quantity of money Higher Lower
Budget de cit Higher Unchanged
The reason for the higher demand for goods and level of output and income for an expansionary scal policy is that
_____________ while for a contractionary monetary policy, it is lower since the _______________.
Select one:
A. investment spending is higher; interest rate is lower
B. government spending is higher; interest rate is higher
C. investment spending is lower; interest rate is higher
D. government spending is lower; interest rate is lower
Your answer is correct. To answer this type of question, you must use a chain of events. An expansionaryscal
policy means that government spending has to be increased and/or taxes have to be decreased. We use the
example of an increase in government spending :
Expansionary scal policy
Chain of events
Impact on the goods market
G↑→ Z↑→ Y↑
Y↑→ YD↑→ C↑
Y↑→ I↑
Impact on the nancial market
i =ἶ
Y↑→ Md↑→ M↑
The end result
, lOMoARcPSD|21997160
The end result is that at a given interest rate, the
increase in government spending leads to an increase
in the level of output and income.
If the IS-LM model represents this, the IS curve shifts
to the right.
A contractionary monetary policy implies an increase in the interest rate to cool down by decreasing the demand for
goods.
Contractionary monetary policy
Chain of events
Impact on the nancial market
MonetaryContraction →i ↑
i↑→ Md↓→ M↓
Impact on the goods market
i↑→ I↓→ Z↓→ Y↓
Y↓→ I↓
Y↓→ YD↓→ C↓
Back to the nancial market
Y↓→ Md↓→ M↓
The end result
The end result is that a contractionary monetary
policy results in a decrease in output and income
level.
If the IS-LM model presents this, the LM curve shifts
upwards.
The correct answer is:
