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EC 302 Final Exam ALL QUESTIONS AND
CORRECT ANSWERS LATEST UPDATE THIS
YEAR
QUESTION: 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 - ANSWER-When the AS (Aggregate Supply) is flat
QUESTION: All else equal a reduction in wages in the AD-AS model
a) increase production
b) reduces production
c) increases prices - ANSWER-Increase production
QUESTION: 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 - ANSWER-Bigger in the IS-LM model than the AD-AS model
QUESTION: Which country allegedly suffered from a liquidity trap problem in the 1990s?
a) U.S
b) U.K.
c) Japan
d) Mexico - ANSWER-Japan
QUESTION: 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 - ANSWER-The LM (Liquidity/Money Supply) is horizontal
QUESTION: 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
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b) larger
c) The same - ANSWER-Smaller
QUESTION: In which consumption theory does an increase in future income increase current
consumption?
Options:
1. Keynesian
2. Modigliani
3. Both one and two
4. Neither - ANSWER-Modigliani
Q; 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 - ANSWER-When LM (Liquidity/Money Supply) is steep
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QUESTION: 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 - ANSWER-When LM (Liquidity/Money Supply) is flat and IS (
Investment/Savings) is steep
QUESTION: Suppose the capital depreciation rate (delta) goes up then,
Options:
1. Consumption increases
2. Investment increases
3. Investment decreases
4. both one and two - ANSWER-Investment Decreases
QUESTION: In 2024 nominal GDP rises faster than real GDP then,
Options:
1. Prices are constant
4
EC 302 Final Exam ALL QUESTIONS AND
CORRECT ANSWERS LATEST UPDATE THIS
YEAR
QUESTION: 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 - ANSWER-When the AS (Aggregate Supply) is flat
QUESTION: All else equal a reduction in wages in the AD-AS model
a) increase production
b) reduces production
c) increases prices - ANSWER-Increase production
QUESTION: For a given G the fiscal multiplier is....
a) Bigger in the IS-LM model than the AD-AS model
1
, Page 2 of 36
b) Smaller
c) The same - ANSWER-Bigger in the IS-LM model than the AD-AS model
QUESTION: Which country allegedly suffered from a liquidity trap problem in the 1990s?
a) U.S
b) U.K.
c) Japan
d) Mexico - ANSWER-Japan
QUESTION: 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 - ANSWER-The LM (Liquidity/Money Supply) is horizontal
QUESTION: 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
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b) larger
c) The same - ANSWER-Smaller
QUESTION: In which consumption theory does an increase in future income increase current
consumption?
Options:
1. Keynesian
2. Modigliani
3. Both one and two
4. Neither - ANSWER-Modigliani
Q; 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 - ANSWER-When LM (Liquidity/Money Supply) is steep
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QUESTION: 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 - ANSWER-When LM (Liquidity/Money Supply) is flat and IS (
Investment/Savings) is steep
QUESTION: Suppose the capital depreciation rate (delta) goes up then,
Options:
1. Consumption increases
2. Investment increases
3. Investment decreases
4. both one and two - ANSWER-Investment Decreases
QUESTION: In 2024 nominal GDP rises faster than real GDP then,
Options:
1. Prices are constant
4
