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B Com Exam  >  B Com Test  >  Macro Economics  >  Derivation of IS and LM Functions - B Com MCQ

Derivation of IS and LM Functions - Free MCQ Test with solutions for B


MCQ Practice Test & Solutions: Derivation of IS and LM Functions (10 Questions)

You can prepare effectively for B Com Macro Economics with this dedicated MCQ Practice Test (available with solutions) on the important topic of "Derivation of IS and LM Functions". These 10 questions have been designed by the experts with the latest curriculum of B Com 2026, to help you master the concept.

Test Highlights:

  • - Format: Multiple Choice Questions (MCQ)
  • - Duration: 10 minutes
  • - Number of Questions: 10

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Derivation of IS and LM Functions - Question 1
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The IS curve in the IS-LM model represents the equilibrium in which market?

Detailed Solution: Question 1

The IS curve represents the equilibrium in the goods market, where planned spending equals income.

Derivation of IS and LM Functions - Question 2
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What does the LM curve represent in the IS-LM model?

Detailed Solution: Question 2

The LM curve represents the equilibrium in the money market, where the demand for money equals its supply.

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Derivation of IS and LM Functions - Question 3
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Why is the IS curve negatively sloped?

Detailed Solution: Question 3

The IS curve is negatively sloped because a higher interest rate reduces investment spending, leading to lower aggregate demand and income.

Derivation of IS and LM Functions - Question 4
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What determines the slope of the LM curve?

Detailed Solution: Question 4

The slope of the LM curve is determined by the responsiveness of money demand to changes in the interest rate.

Derivation of IS and LM Functions - Question 5
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When the LM curve shifts to the right, what happens to the equilibrium interest rate and income?

Detailed Solution: Question 5

When the LM curve shifts to the right, the equilibrium interest rate decreases, and income increases.

Derivation of IS and LM Functions - Question 6
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In the IS-LM model, what happens when there is an excess demand for money?

Detailed Solution: Question 6

Excess demand for money leads to rising interest rates as people sell other assets to acquire more money.

Derivation of IS and LM Functions - Question 7
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Why is the LM curve positively sloped?

Detailed Solution: Question 7

The LM curve is positively sloped because an increase in interest rates increases money demand due to higher opportunity costs of holding non-interest-bearing money.

Derivation of IS and LM Functions - Question 8
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In the IS-LM model, what happens when the IS curve shifts to the right?

Detailed Solution: Question 8

When the IS curve shifts to the right, the equilibrium interest rate increases, and income increases.

Derivation of IS and LM Functions - Question 9
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What is the joint equilibrium in the IS-LM model?

Detailed Solution: Question 9

The joint equilibrium in the IS-LM model is when both the goods and money markets are in equilibrium simultaneously.

Derivation of IS and LM Functions - Question 10
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How do income and interest rates adjust towards equilibrium in the IS-LM model?

Detailed Solution: Question 10

In the IS-LM model, income rises, and interest rates fall as the system moves towards equilibrium, with adjustments in both goods and money markets.

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About this B Com Practice Test

This test contains 10 MCQs on Derivation of IS and LM Functions with detailed solutions for each question. It is part of the Macro Economics course on EduRev, designed to align with the current B Com syllabus. Each solution explains not just the correct answer but also gives you an understanding of the topic — not just to attempt the question but also help you prepare for the exam with practice.

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