7 In the equation of exchange, according to the 11 Assuming the country is experiencing a quantity theory of money, the quantity of recessionary gap, which of the following money and velocity of money are directly actions would the central bank most likely related to engage in? (A) the value of production (A) Sell bonds in open market operations and (B) the nominal interest rate decrease personal income taxes (C) the unemployment rate (B) Increase the discount rate and decrease (D) the reserve requirement the reserve requirement (E) the rate of capital inflow (C) Sell bonds in open market operations and 8 Which of the following would most likely increase personal income taxes (D) Sell bonds in open market operations and result in cost-push inflation? increase the reserve requirement (A) A substantial decrease in consumption expenditures (E) Buy bonds in open market operations and decrease the discount rate B) A signifcant increase in union wages (C) Contractionary fiscal policy 12 Which of the following will be the result of a D) Expansionary monetary policy decrease in input prices in the short run? E) An appreciation of the country's Aggregate Aggregate currency Demand Curve Supply Curve Shift to the left 9 If society experiences an increase in human (A) Shift to the left capital but nominal wages remain the same, (B) Shift to the right Shift to the left (C) Shift to the left No change what will happen to real gross domestic (D) Shift to the right Shift to the right product (RGDP) and real wages? (E) No change Shift to the right RGDP Real Wages (A Increase Increase 13 Assume the economy of the nation of (B) Increase Decrease Cliffland is operating short of full (C) Indeterminate Increase employment output and economists agree that (D) Decrease Decrease it would take $400 million dollars of (E) Decrease Increase additional spending to bring the economy to 10 Scarcity is the condition in which long run equilibrium. If the marginal propensity to consume is 0.75, what is the (A) supplies of the four factors of production least amount of government spending that are relatively unlimited could bring the nation back to long run B) capital stock does not depreciate equilibrium? C) structural unemployment means the labor (A) $50 million force is not fully utilized (B) $80 million (D) human wants are beyond society's (C) $100 million production (D) $200 million (E) population and labor force are (E) $400 million experiencing negative growth possibilities