1.If the government wants to increase spending on public works by $100 billion to stimulate the economy without increasing inflation, it would

Select one:

A. decrease taxes by $100 billion.

B. increase taxes by $100 billion.

C. decrease taxes by less than $100 billion.

D. increase taxes by less than $100 billion.

E. increase taxes by more than $100 billion.

2. An open market sale by the Federal Reserve will increase

Select one:

A. business taxes.

B. bank loans.

C. interest rates.

D. investment spending.

E. the money supply.

3. If the Federal Reserve purchases securities, then

Select one:

A. consumer spending will increase and AD will shift right.

B. consumer spending will decrease and AD will shift left.

C. government spending will increase and AD will shift right.

D. investment spending will increase and AD will shift right.

E. investment spending will decrease and AD will shift left.

4.Contractionary monetary policy would most likely result in

Select one:

A. increased interest rates.

B. decreased consumer spending.

C. increased real GDP.

D. decreased aggregate supply.

E. increased investment.

5.Which of the following will cause the production possibilities frontier to shift outward?

Select one:

A. An increase in aggregate demand.

B. An increase in transfer payments.

C. A decrease in long-run aggregate supply.

D. An increase in worker productivity.

E. An increase in government spending.