EC 302 Final Exam Questions with Answers| Verified

2026/2027
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EC 302 Final Exam Questions with
Correct Answers| Verified
When is monetary policy in the IS-LM model more effective?

a) When the LM is flat.

b) When the IS is steep

c) When the LM is steep

d) Both b and c Ans: When LM (Liquidity/Money Supply) is steep

When is Fiscal policy in the IS-LM model more effective?

a) When the LM is flat.

b) When the IS is steep

c) When the LM is steep

d) Both a and b Ans: When LM (Liquidity/Money Supply) is flat and IS
( Investment/Savings) is steep

When is monetary policy more effective in the AD-AS model?

a) When the AS is flat

b) When the AS is steep

c) I don't know Ans: When the AS (Aggregate Supply) is flat

All else equal a reduction in wages in the AD-AS model

a) increase production

b) reduces production

c) increases prices Ans: Increase production

For a given G the fiscal multiplier is....

a) Bigger in the IS-LM model than the AD-AS model

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b) Smaller

c) The same Ans: Bigger in the IS-LM model than the AD-AS model

Which country allegedly suffered from a liquidity trap problem in the
1990s?

a) U.S

b) U.K.

c) Japan

d) Mexico Ans: Japan

If money demand in the money market is horizontal, then

a) The IS is horizontal

b) the IS is vertical

c) the LM is horizontal

d) the LM is vertical Ans: The LM (Liquidity/Money Supply) is
horizontal

A reduction of one unit of the tax rate in the IS-LM model has a...
effect as in the AS-AD model

a) Smaller

b) larger

c) The same Ans: Smaller

In which consumption theory does an increase in future income
increase current consumption?

Options:

1. Keynesian

2. Modigliani