1.The central bank announces that it expects inflation to be relatively low while unemployment rises in the following months. What would be an expected monetary policy action as a result of this forecast?

a. Increase government spending

b. Decrease the discount rate

c. Increase the reserve ration

d. Sell bonds on the open market.

e. Decrease marginal income tax rates.

2.Compared to price in a completely closed economy, a market in an open economy with an effective quota imposed will result in

a. higher prices due to increased demand for the good

b. lower prices due to decreased domestic demand

c. increased total supply and lower prices

d. increase in prices due to decreased foreign supply

e. domestic demand increases leading to lower prices.

3.With an MPC of 0.8, government spending increases $20 billion while taxes decrease $10 billion. Based on this data, what is the cumulative effect on GDP?

a. An increase of $40 billion

b. An increase of $80 billion

c. An increase of $100 billion

d. An increase of $140 billion

e. An increase of $150 billion.