Micro Economics MCQ (GK Set-1) with Answers

It shows that the lower is the interest rate, the higher is the equilibrium level of output

The more responsive planned spending is to changes in the interest rate, the more interest elastic is the IS curve

A fall in the interest rate will shift IS to the right

An increase in exports will shift IS to the right

An increase in the demand for money will shift LM right

An increase in the supply of money curve will shift LM right

It shows that the higher is the level of output, the higher is the equilibrium rate of interest

The more interest elastic is the demand for money, the more interest elastic is the LM curve

The economy will move rapidly to the equilibrium.

The economy will move rapidly to the point on the LM curve that applies to the current level of output, and then move slowly along the LM curve to the equilibrium

The economy will move rapidly to the point on the IS curve that applies to the current rate of interest, and then move slowly along the IS curve to the equilibrium

The economy will move slowly to the new equilibrium, and will not be on either the IS curve or the LM curve until it reaches this equilibrium

By ignoring the fact that a rise in output will lead to higher interest rates, the multiplier model will predict that the planned expenditure line will end up 100 billion dollar a year higher than it started.

By ignoring the fact that a rise in output will lead to higher interest rates, the multiplier model will predict a rise in output of 400 billion dollar a year

By allowing for the fact that a rise in output will lead to higher interest rates, the IS-LM model will predict a rise in output of less than 400 billion dollar a year

The IS curve will shift to the right by less than 400 billion dollar a year

If spending is very responsive to changes in interest rates, and the demand for money is interest inelastic, then monetary policy tends to be more powerful than fiscal policy

If spending is not very responsive to changes in interest rates, and the demand for money is interest elastic, then fiscal policy tends to be more powerful than monetary policy

It might sometimes make sense for a government to combine an expansionary monetary policy with an expansionary fiscal policy

It would never make sense for a government to combine an expansionary monetary policy with a contractionary fiscal policy