13) In an AD-AS model with an upward sloping AS-curve, a decrease in the unemployment rate combined with a price decrease in the short run is most likely the result of a. an adverse supply shock b. an adverse supply shock followed by restrictive monetary policy c. a favourable supply shock d. a decrease in money supply 14) Which of the following events would NOT involve a supply shock that would shift the aggregate supply curve? a. The OPEC cartel for oil prices collapses due to political disagreements. b. Financial crisis results in a freezing of interbank lending. C. Drought destroys half of a country's crops. d. Tax for energy use introduced to help reduce global emissions. 15) The supply curve of loanable funds slopes up because a. at higher bond prices more loanable funds will be supplied. b. higher interest rates reduce the inflation rate. c. an increase in the interest rate makes lenders more willing and able to supply more funds. d. a decrease in the interest rate makes lenders more willing and able to supply more funds. 16) Which of the following is NOT a Central Bank policy instrument to control money supply: a. Capital requirements b. Reserve requirements C. Open market operations d. Refinancing rate 17) A rise in the reserve ratio a. increases the expenditure multiplier. b. increases the money multiplier. C. lowers the expenditure multiplier. d. lowers the money multiplier.1E}All of the following are explanations of why the aggregate demand curve is downward slopping EKCEF'T for: a. b. When prices increase people may feel less wealthy and therefore decide to consume less. When prices increase people decide to substitute and therefore consume less, reducing the aggregate demand. A reduction in prices may reduce the demand for money, reducing interest in the short run and therefore stimulating investment and aggregate demand. An increase in prices may increase the interest rate in the country, triggering capital inows that would make the local currency stronger, increasing imports and reducing er: ports. 19) Suppose that EDP v equals l, consumption E equals 50, government spending G equals 20, taxes equal 30 and net exports equal II]. a. Investment is equal to 2i], private savings is 2i], and public savings are [1. b Investment is equal to 2|], private savings is 20, and public savings are II]. c. Investment is equal to El], private savings is ll], and public savings are it]. d Investment, Private Savings and Public Savings cannot be determined with the information provided. ED} If the demand for money is perfectly elastic, conventional monetary policy a. b. Will be very effective because in this case, the demand curve in the money market is completely flat. This implies that the central bank is able to increase or decrease the interest rate by changing the money supply. Will be very effective because in this case, the demand curve in the money market is vertical. This implies that the central bank is able to in crease or decrease the interest rate by changing the money supply. May not be very effective because, in this case, the demand curve in the money market is vertical. This implies that the central bank is unable to increase or decrease the interest rate by changing the money supply. May not be very effective because, in this case, the demand curve in the money market is completely at. This implies that the central bank is unable to increase or decrease the interest rate by changing the money supply. 21) How are the weights on the various goods and services in the CPI basket determined? a. All goods and services are weighted equally. b. A survey is conducted to determine how much of each good and service typical consumers purchase. c. The weights equal the ratio of expenditures on each good or service divided by the total consumption expenditures in the GDP accounts. d. Each good and service is weighted according to its price. 22) Open market operations describe the a. loan-making activities of commercial banks. b. effect of expansionary monetary policy on interest rates. C. operation of competitive markets in the banking industry as the result of financial deregulation. d. buying and selling of bonds by the Central Bank