Chapter 20 Self-test questions

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Investment is __________ related to the __________ rate of interest.

Positively, real correct incorrect

Negatively, real correct incorrect

Positively, nominal correct incorrect

Negatively, nominal correct incorrect

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The price of capital goods is _______ related to the level of investment by firms

positively correct incorrect

neutrally correct incorrect

inversely correct incorrect

None of the above correct incorrect

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When an invention is turned into a commercial venture, it becomes __________

innovation correct incorrect

trademark correct incorrect

patent correct incorrect

copyright correct incorrect

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When it comes to desired investment spending, the interest rate that matters is the _______

Nominal interest rate correct incorrect

Base rate correct incorrect

Real interest correct incorrect

Inflation rate correct incorrect

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Investment spending comprises of __________

Food, entertainment, dressing correct incorrect

Treasury bills, betting, shares correct incorrect

New housing, capital equipment, inventories correct incorrect

Furnishing, televisions, cars correct incorrect

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The IS curve was named as such because ___________

In an open economy where only households, government and firms are the agents, the curve shows the combinations of GDP and inflation which equates saving and investment correct incorrect

In a closed economy where only households, government and firms are the agents, the curve shows the combinations of GDP and inflation which equates saving and investment correct incorrect

In a closed economy where only households and firms are the agents, the curve shows the combinations of GDP and the interest rates which equates saving and investment correct incorrect

In an open economy, the curve shows the combinations of GDP and the interest rates which equates saving and investment correct incorrect

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The slope of the IS curve is __________

positive correct incorrect

Flat correct incorrect

Negative correct incorrect

Steep correct incorrect

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The point of intersection of the IS-LM curves is the point where __________

There is equilibrium in the money market correct incorrect

There is equilibrium in the goods market correct incorrect

There is equilibrium in both the goods and money market correct incorrect

None of the above correct incorrect

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When autonomous spending rises, the __________ curve shifts but the __________ curve does not.

IS, LM correct incorrect

LM, IS correct incorrect

Money, goods correct incorrect

None of the above correct incorrect

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The monetary transmission mechanism shows __________

How a monetary shock affects the economy correct incorrect

How a monetary shock affects real spending correct incorrect

How money is channelled into the economy correct incorrect

None of the above correct incorrect