Reference no: EM13564085
1. True or false? Explain your answer.
“A decrease in the marginal propensity to save implies that the IS-curve will become steeper.”
2. True or false? Explain your answer.
“If the central bank keeps the supply of money constant, then the money supply curve is vertical, which implies a vertical LM-curve.”
3. "Restrictive monetary policy reduces consumption and investment." Comment on this statement.
4. "If government spending is increased, money demand will increase." Comment.
5. "An increase in autonomous investment reduces the interest rate and therefore the money sector will no longer be in equilibrium." Comment on this statement.
6. "A monetary expansion leaves the budget surplus unaffected." Comment on this statement.
7. "Restrictive monetary policy implies lower tax revenues and therefore to an increase in the budget deficit." Comment on this statement.
8. “If the demand for money becomes more sensitive to changes in income, then the LM-curve becomes flatter.” Comment on this statement.
9. “A decrease in the income tax rate will increase the demand for money, shifting the LM-curve to the right.” Comment on this statement.
10. “If the demand for money becomes more insensitive to changes in the interest rate, equilibrium in the money sector will have to be restored mostly through changes in income. This implies a flat LM-curve.” Comment on this statement.