Which of the following best describes the IS-LM curve model in macroeconomics?

It determines the equilibrium in the goods market through the intersection of the IS and LM curves.

It focuses on the equilibrium between supply and demand in the labor market.

It analyzes the relationship between inflation and unemployment in an open economy.

It examines the impact of changes in exchange rates on aggregate demand.

In an open economy, how does an increase in net exports affect the IS curve?

It shifts the IS curve to the left.

It causes movement along the IS curve.

It shifts the IS curve to the right.

It has no impact on the IS curve.

What is the role of the LM curve in the IS-LM model?

It represents the equilibrium between investment and savings.

It illustrates the relationship between income and output.

It shows the equilibrium between money supply and money demand.

It depicts the relationship between exports and imports.

In an open economy, how does a depreciation in the real exchange rate affect the IS curve?

It shifts the IS curve to the left.

It causes movement along the IS curve.

It shifts the IS curve to the right.

It has no impact on the IS curve.

What is the effect of an increase in foreign income on an open economy's equilibrium level of income?

It leads to a decrease in the equilibrium income.

It has no impact on the equilibrium income.

It leads to an increase in the equilibrium income.

It causes a movement along the equilibrium income.

In the IS-LM model, what happens to the equilibrium level of income if there is a recession in foreign economies?

The equilibrium income increases.

The equilibrium income remains unchanged.

The equilibrium income decreases.

The equilibrium income experiences fluctuations.

What does the LM curve represent in the IS-LM model?

Equilibrium in the labor market.

Equilibrium in the goods market.

Equilibrium in the money market.

Equilibrium in the foreign exchange market.

How does an increase in domestic spending affect the net exports of an open economy?

Net exports are not affected by domestic spending.

What is the impact of an increase in foreign income on net exports?

Net exports fluctuate randomly.

How does a depreciation in the real exchange rate affect net exports?

Net exports become unpredictable.

Determination of Income through IS and LM Curves Free MCQ Practice Test with Solutions

	Macro Economics 59 videos\|61 docs\|29 tests

	Macro Economics 59 videos\|61 docs\|29 tests

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