2. Short- to medium term fluctuations in the economy (i.e., business cycles) are primarily driven by changes (or shocks) to:

A. Underlying trend growth

B. Aggregate supply

C. Inflation expectations

D. All of the above

E. None of the above

5. In a closed economy version of the Keynesian multiplier model, if the marginal propensity to consume (MPC) is greater than zero but less than one, the spending multiplier is:

A. Greater than zero but less than one

B. Equal to one

C. Greater than one

D. Uncertain

E. None of the above

7. Monetary policy tends to be less effective when:

A. Money demand is insensitive to interest rate

B. Investment is sensitive to interest rate

C. The LM curve is steep

D. All of the above

E. None of the above

8. Fiscal policy tends to be less effective when:

A. Money demand is insensitive to interest rate

B. Investment is sensitive to interest rate

C. The IS curve is flat

D. All of the above

E. None of the above

9. Empirical evidence suggest that the fiscal multiplier is:

A. Smaller when there is a negative output gap

B. Larger when there is a negative output gap

C. Smaller when there is a positive output gap

D. Larger when there is a positive output gap

E. B. and C.

19. Other things equal, the "natural" rate of interest will fall if:

A. Supply of saving falls

B. Household consumption rises

C. Investment demand rises

D. All of the above

E. None of the above

My answers: are bolded