ECO. 304 (ONLINE QUIZ/ASSIGNMENT-ISL M MODEL AND EFFECTIVE MONETARY AND FISCAL POLICY-18/11/2024)
1. Explain the ISLM model’s components and equilibrium.
2. Describe the impact of an increase in money supply on the LM curve.
3. Analyze the effect of a decrease in government spending on the IS curve.
4. Discuss the effectiveness of fiscal policy in stimulating economic growth during a recession.
5. Evaluate the limitations of monetary policy in stabilizing output and employment.
*Multiple Choice Questions*
Write your answers in full and explain it well
6. Which shifts the IS curve to the right?
A) Increase in taxes
B) Decrease in government spending
C) Increase in government spending
D) Decrease in interest rates
7. In the ISLM model, an expansionary monetary policy leads to:
A) Higher interest rates and lower output
B) Lower interest rates and higher output
C) Higher interest rates and higher output
D) Lower interest rates and lower output
8. What happens to the LM curve when the central bank increases the money supply?
A) Shifts left
B) Shifts right
C) Remains unchanged
D) Becomes steeper
Write your answers in full and explain it well
9. Suppose the economy is in a recession. Illustrate and explain the effects of a 10% increase in government spending.
10. Assume the central bank lowers the interest rate from 5% to 4%. Analyze the impact.
11. Evaluate the effectiveness of monetary and fiscal policy during a financial crisis.
12. Compare the impact of monetary and fiscal policy on aggregate demand.
13. How does an increase in interest rates affect investment and consumption?
14. What is the impact of a decrease in taxes on aggregate demand?
15. Explain the concept of crowding out in the context of fiscal policy.
16. Compare the effectiveness of expansionary monetary and fiscal policies.
17. Analyze the differences between Keynesian and Monetarist views on monetary policy.
18. Suppose the economy experiences stagflation. Recommend appropriate policy measures.
19. Assume a recession with high unemployment. Design a policy package.
20. Discuss the limitations of the ISLM model in explaining real-world economic phenomena.
