1. The economy of Greenoa is represented by the following system of equations:

Y = C + I + G + X - M

C = 75 + 0.9(Y-T)

I = 200 - 100r

G = 150

X = 50

M = 0.1Y

T = 100

where Y is GDP, C is consumption, I is investment, G is government expenditures, X is exports of goods and services, M is imports of goods and services, T is taxes, and r is the interest rate. What is the government expenditure multiplier?

Select one:

a. 150

b. 10

c. infinity ()

d. 50

e. 5

2. Which of the following is shifted by a change in expected price level?

Select one:

a. the aggregate demand curve

b. the short-run aggregate supply curve, but not the long-run aggregate supply curve

c. the long-run aggregate supply curve, but not the short-run aggregate supply curve

d. the short-run aggregate supply curve and the long-run aggregate supply curves

e. none of the above

3. If the natural rate of unemployment decreases, the short-run Phillips curve will shift to the ______ and the long-run Phillips curve will shift to the _______ by an amount ______ the decrease in the natural rate of unemployment.

Select one:

a. positive / deficit

b. right / right / equal to

c. right / left / less than

d. left / left / equal to

e. left / right / more than

4. Contractionary fiscal policy

Select one:

a. increases aggregate demand.

b. decreases aggregate demand.

c. increases short-run aggregate supply.

d. increases long-run aggregate supply.

e. A, C, and D are correct.

5. In a small open economy, a decrease in the money supply produces a _____ shift in aggregate demand curve if the exchange rate is _____ than if it is _____.

Select one:

a. larger / flexible / fixed

b. larger / fixed / flexible

c. smaller /fixed / flexible

d. zero / fixed / flexible

e. Both A and C are correct.

6. An increase in government spending on goods and services has a large impact on output ____ and a large impact on price level ____.

Select one:

a. in the short run / in the long run

b. in the long run / in the short run

c. in the short run / in the short run

d. in the long run / in the long run

e. Both C and D are correct.

7. If the central bank increases the bank rate, commercial banks are _____ reserves and this in turn causes the money supply to ______.

Select one:

a. discouraged from borrowing / decrease

b. encouraged to borrow / increase

c. discouraged from borrowing / increase

d. encouraged to borrow / decrease

e. Both A and B are correct.

8. In a small open economy, the increase in government spending produces a _____ shift in aggregate demand curve if the exchange rate is _____ than if it is ____.

Select one:

a. larger /flexible / fixed

b. larger / fixed / flexible

c. smaller / fixed / flexible

d. zero / fixed / flexible

e. A, C, and D are correct.

9. If the central bank increases the rate of growth of money and maintains it at the new higher rate, eventually the expected inflation will _______ and the short-run Phillips curve will shift ______.

Select one:

a. increase / downward

b. decrease / downward

c. increase / upward

d. decrease / upward

e. none of the above

10. Which of the following are automatic stabilizers?

Select one:

a. unemployment insurance program

b. social assistance benefits

c. change in overnight rate by the central bank

d. open market operations by the central bank

e. A and B