8. According to Abel, Bernanke and Croushore, the LM curve is upward sloping bec

Question

8. According to Abel, Bernanke and Croushore, the LM curve is upward sloping because A. Higher output raises savings and leads to a lower market-clearing B. Higher output lowers savings and leads to a higher C. Higher output lowers money demand, and thus lowers the real D. Higher output raises money demand, and thus raises the real E. None of the above. real interest rate. market -clearing real interest rate. interest rate that clears the asset market. interest rate that clears the asset market. M*-M-C(MP, LP...(P)...C-M-M 9. In the extended circuit of capital above, according to Foley, M A. Stands for the payment of interest to the financial capitalist. B. Stands for the payment of interest and principle to the industrial capitalist. C. Stands for commodity capital as unsold inventories. D. Stands for productive capital in plant and equipment.. E. None of the above. 10. According to Foley, if we abstract from the uncertainty of realization and the possibility of bankruptcy, capital firms would A. Bid the interest rate to equality to the Federal Funds rate. B. Bid the interest rate to the rate of surplus value. C. Bid the interest rate to the average rate of profit. D. Bid the interest rate to the rate of inflation. E. None of the above. 11. In the neoclassical growth model, a decrease in the savings rate A. Raises the steady-state level of per capita output. B. Does not affect the steady-state level of per capita output. C. Lowers the steady-state level capital-labor ratio. D. Raises the steady-state capital-labor ratio. E. None of the above. 12. According to Abel, Bernanke and Croushore, the IS shows A. The real interest rate for which the asset market is in equilibrium B. The real interest rate for which exports equal imports. C. The real interest rate for which the goods market is in equilbrium. D. The real interest rate for which the goods market is in equilibrium. E. None of the above.

Explanation / Answer

First question is answered below

1.

Correct option: (d)

Reason: As per Abel et al, as income increases, output increases and so does demand for money. This shifts the MD curve to the right, leading to an increase in market interest rate, which gives an upward sloping shape to LM curve, thereby clearing the assets market in equilibrium.

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