23. The nominal GDP and real GDP of a country in 2017 were $2 trillion and $2.5 trillion respectively. In the base year, the nominal GDP was $1 trillion. What is the change in the GDP deflator from the base year to 2017?

A. The GDP deflator decreases by 20. B. The GDP deflator decreases by 25. C. The GDP deflator increases by 20. D. The GDP deflator increases by 25. E. The GDP deflator remains unaffected.

24. If the rate of inflation unexpectedly increases, which of the following individuals will suffer a loss?

A. An individual whose wage is indexed to the price level B. The borrower who has a home mortgage with a fixed interest rate C. The holder of a government bond that has an annual fixed interest payment in dollars D. An individual who has a significant dollar amount of student debt E. An individual who receives a percentage increase in salary that exceeds the percentage increase in inflation

25. If the government wishes to reduce unemployment and lower interest rates, which policy combination will be most effective?

A. Increasing government spending and lowering taxes B. Central bank buying government bonds and increasing government spending C. Central bank buying government bonds, and the central bank lowering the discount rate D. Increasing government spending, and the central bank lowering the required reserve ratio E. Central bank selling government bonds and increasing government spending

26. If it is assumed that the market for good Z is in equilibrium and Z is an inferior good, what will be the result following an increase in the average income of consumers?

A. A decrease in the equilibrium price of good Z and a decrease in the equilibrium quantity of good Z. B. An increase in the equilibrium price of good Z and an increase in the equilibrium quantity of good Z. C. An increase in the equilibrium price of good Z and a decrease in the equilibrium quantity of good Z. D. Since the demand for an inferior good must be perfectly inelastic, there will be no change in quantity; price may increase or decrease. E. An increase in equilibrium quantity with an indeterminate impact on the equilibrium price.

27. When the central bank sets or determines the money supply, which of the following is true?

A. The money supply is drawn as a vertical line, independent of the nominal rate of interest. B. The money demand is no longer influenced by the nominal rate of interest. C. The money demand curve becomes perfectly horizontal at the interest rate set by the central bank. D. The money supply exceeds the money demand at equilibrium, if banks hold excess reserves. E. The money supply only determines the interest rate and not the quantity of money.