2. If potential GDP is 325 billion and there is a positive GDP gap of 25 billion, then actual GDP is:

325 billion

300 billion

350 billion

25 billion

3. Suppose that a persons nominal income was $50,000 in 1985 and was still $50,000 in 1986.If 1985 is the base year for the CPI index and the Consumer price index is 125 in 1986 then the persons real income willbypercent.

answer in for each blank.In the first blank write either "increase" or "decrease", and for the second blank write the percent of the increase or decrease.

4. If the Federal Reserve Bank wants to pursue an expansionary monetary policy, which one of the following would/could they do?

a.Buy back treasury bills (U.S. securities) from the public

b.Sell treasury bills (U.S. Securities) to the public

c.Increase the reserve ratio

d.Decrease taxes