1.How would the size of the multiplier affect the slope of the IScurve? (Hint: In the45-line diagram, how does the multiplier affect the change in the equilibrium level of real GDP for a given change in the real interestrate?)

A.

The larger themultiplier, the flatter the IS curve.

B.

The larger themultiplier, the steeper the IS curve.

C.

The size of the multiplier does not affect the slope of the IS curve.

2.The MP curve is a curve that represents

A.

Federal Reserve monetary policy.

B.

the combinations of the real interest rate and aggregate output that represent equilibrium in the market for money.

C.

equilibrium in the market for goods and services.

D.

theshort-run relationship between the output gap and the inflation rate.

3.What factors cause the Phillips curve toshift? (Check all that apply.)

A.

supply shocks

B.

changes in the actual inflation rate

C.

changes in the expected inflation rate

D.

demand shocks

4.In the followingsituation, briefly explain whether theshort-run Phillips curve with the unemployment rate on the horizontal axis willshift, and if it doesshift, in which direction it willshift:

Favorableweatherconditionsresultinbumperagriculturalcrops.

A.

This would causeamovementdownalongtheshortrunPhillipscurve.

B.

This would shifttheshortrunPhillipscurvedown.

C.

This would shifttheshortrunPhillipscurveup.

D.

This would causeamovementupalongtheshortrunPhillipscurve.

If monetary policy does not cause a change in interestrates,

A.

it can still affect the output gap and the inflation rate by the willingness and ability of the banks to make loans.

B.

it can still affect the output gap and the inflation rate through the bank lending channel.

C.

it cannot affect the output gap and the inflation rate because the effect of the monetary policy depends on the change in interest rate.

D.

both(a) and(b)