1. Which of the following would benefit borrowers of fixed interest rate loans at the expense of their creditors? (5 points)

		The actual inflation rate is less than the expected inflation rate.
		The actual inflation rate is more than the expected inflation rate.
		Hyperinflation begins to occur in the economy.
		The average price level remains perfectly stable.
		The average price level fluctuates wildly for a sustained period.

2. Which of the following groups would benefit from an increase in the average price level in an economy? (5 points)

		Individuals and institutions who have loaned money
		Borrowers of loans with rates that automatically adjust with inflation
		Those controlling resources whose prices increased by more than the average
		Those controlling factors of production whose prices decreased during the same period
		The creditors for capital investment loans

3. Which of the following would explain a shift from AD₂ to AD₃? (5 points)

		Consumers significantly reduce their typical spending.
		The government increases the income tax rate.
		Imports decrease while exports increase.
		Stock market prices increase.
		There is a general increase in the price level in the economy.

4. The aggregate demand model dictates that given a price level increase in an economy, (5 points)

		the aggregate demand will shift left
		the aggregate demand will shift right
		the aggregate quantity demanded of goods and services will increase
		the aggregate quantity demanded of goods and services will decrease
		the nominal GDP will increase

5. An increase in the price level corresponds to (5 points)

		a decrease in aggregate demand
		an increase in aggregate supply
		movement along the aggregate supply curve
		an inflationary gap
		a recessionary gap

6. A decrease in energy prices in the short run generally (5 points)

		decreases real output
		increases nominal output but not real output
		increases real output
		corresponds to an increase in the unemployment rate
		has no impact on either nominal or real output

7. Which of the following could occur with cost-push inflation? (5 points)

		An output decrease, employment decrease, and price level decrease
		An output decrease, employment decrease, and price level increase
		An output decrease, employment increase, and price level increase
		An output increase, employment increase, and price level decrease
		An output increase, employment increase, and price level increase

8. Use the graph to answer the question that follows.

\fLRAS SRAS, SRAS, Price Level PL, PL, - - - AD Real GDPSRAS Price Level PL, PL, - - - - - AD2 AD - - - Y. Y2 Real GDP