1. If spending increases by $20 million and the MPC = 0.9, what is the maximum change in real GDP?

2. A country has a recessionary gap of $20 million and the economy's MPC = 0.8. How much of an increase in government spending is needed in order to close that recessionary gap? How much of a tax cut is needed to close the recessionary gap?

3. A country has a recessionary gap and neither the government nor the central bank implement fiscal or monetary policy to reduce the recessionary gap. As the economy adjusts to a new long-run equilibrium, which direction will the SRAS curve shift? What causes that shift?

4. A country has an inflationary gap and neither the government nor the central bank implement fiscal or monetary policy to reduce the inflationary gap. As the economy adjusts to a new long-run equilibrium, which direction will the SRAS curve shift? What causes that shift?

5. A nation's central bank decides to purchase bonds from the public. What will happen to the nation's supply of money and the nominal interest rate?

6. A nation's central bank decides to sell bonds to the public. What will happen to the nation's supply of money and the nominal interest rate?

7. The nation's price level increases. What effect will this have on the demand for money and the nominal interest rate?

8. A government runs a budget deficit when its ___________________ is greater than its _______________________.

9. When a government runs a budget deficit what happens to the demand for loanable funds and the real interest rate?