Suppose there are two types of bonds (one-year bonds and two-year bonds) and that the yield curve is initially upward sloping in period t. Note: For this question assume that: (1 ) expected inflation is zero; and (2 ) the relevant interest rate on the vertical axis of the IS-LM model is the one-year interest rate. Based on our understanding of the IS-LM model, of the yield curve and of financial markets, we know with certainty that an announcement in period t of a partially unexpected future increase in taxes (to be implemented in period t + 1 ) will have which of the following effects?
A) stock prices will increase in period t
B) stock prices will fall in period t
C) the yield curve will become steeper in period t
D) none of the above
Question 2
Which of the following statements is consistent with a given (i.e., fixed) LM curve?
A) A reduction in the interest rate causes investment spending to increase.
B) A reduction in the interest rate causes money demand to decrease.
C) A reduction in the interest rate causes an increase in the money supply.
D) An increase in output causes an increase in demand for goods.
E) An increase in output causes an increase in money demand.
The three types of cytoskeletal filaments
Types of Synapses
Various types of integumentary conditions. (G) Burn, second degree.
Types of Levers
Last year, Terrific Copying had total revenue of $475 000, while operating at 60% of capacity. ...
Type II curve. Mortality does not vary with age. Data for five-lined skink (Eumeces fasciatus).