Hi, Please answer the following questions in the pictures that are circled in blue (the question number is circled). Then provide a typed explanation of each correct answer. Thanks

Real Output Peak Expansion Contraction Actual (21. Economic growth is shown by a rightward shift in Potential 25. Which of the following measures the opportunity (A) the aggregate demand curve cost of holding currency? (B) the long-run Phillips curve A A) The nominal wage rate C) the production possibilities curve (B) The increase in the demand for money D) the short-run aggregate supply curve Trough E) the money supply curve (C) The forgone interest on alternative assets (D) The ability to access currency to meet unexpected expenses 2. During a period of stagflation, a nation is most (E) The average income tax rates Time likely experiencing A) high unemployment and low inflation 26. contractionary monetary policy combined with 16. According to the business cycle represented in the diagram B) low unemployment and high inflation an expansionary fiscal policy will above, the actual rate of unemployment equals the natural rate of unemployment when the economy is D C) low inflationary expectations A) decrease both income and consumption (D) a decrease in short-run aggregate supply (B) increase both income and consumption (A) in expansion (E) an increase in taxes and government spending C) have uncertain effects on the interest rate (B) in contraction and investment (C) at the peak 23. If businesses become optimistic about the (D) increase the interest rate and decrease (D) at the trough profitability of investments in an economy, which investment E) on the potential line of the following will happen in the loanable funds E) increase both the interest rate and investment market in the short run? (A) The supply and demand for loanable funds 27. Ms. Smith withdraws $1,000 from her safe and will increase. deposits the money in a bank. If the bank holds 17. A fiscal policy action to reduce inflationary (B) The supply and demand for loanable funds no excess reserves and the reserve requiremer pressure would be to increase which of the 19. Assume the government reduces its spending will decrease. is 10 percent, how will this deposit increase the following? and raises income taxes in an effort to reduce the budget deficit. The most likely short-run A C) The demand for loanable funds by the private bank's required reserves and the bank's loans? sector will decrease. Required Reserves Loans A) The required reserve ratio result will be an increase in D) The real interest rate will increase. B) The discount rate A) $1,00 $9,000 F (A) interest rates E) The real interest rate will decrease. C) Transfer payments B) $1,000 $10,000 Government spending B B) unemployment $900 $100 24. If investment demand becomes less responsive to $900 Income tax rates C) the money supply $100 D) the price level changes in interest rates, which of the following (E) $100 $1,000 E) personal savings is true? 18. The nominal gross domestic product of China in (A)/ An expansionary fiscal policy results in less A country can have an increased surplus in its 2010 is a measure of the total value of which of balance of trade as a result of the following in 2010 ? Of Which of the following is true about inflation and crowding out. interest rates? B) An expansionary fiscal policy results in more (A) an increase in domestic inflation A) Financial assets, including stocks, in China (A) The higher the inflation rate, the higher the 14 crowding out. B) declining imports and rising exports (B) Firms located within the borders of China real interest rate. (C) An expansionary monetary policy is more (C) higher tariffs imposed by its trading partners C) Final goods and services consumed in China effective. (D) Final goods and services produced within the B) If there is no actual or expected inflation, the (D) an increase in financial capital inflow (D) A contractionary monetary policy is more E) an appreciating currency borders of China (E) Final goods and services exported by China A nominal and real interest rates are equal. (C) If the economy is experiencing deflation, the effective. nominal interest rate exceeds the real (E) An expansionary monetary policy results 29. Country X has a budget deficit. Which of the to the rest of the world interest rate. in more crowding out. following changes in government budget outlays (D) The higher the inflation rate, the lower the and tax revenues will result in a decrease in nominal interest rate. Country X's government budget deficit? E) The nominal interest rate is the difference Government Outlays Tax Revenues between the real interest rate and the expected inflation rate. (A) Fall by $100 million Fall by $600 million B) Fall by $200 million Fall by $200 million (C) Rise by $300 million Fall by $300 million D) Rise by $400 million Rise by $600 million (E) Rise by $500 million Rise by $500 million authorized copying or reuse of any part of this page is Illegal. Unauthorized copying or reuse of GO ON TO THE NEXT PAGE. any part of this page is illegal. GO ON TO THE NEXT PAGE. -7- .8-41. Which of the following would most likely lead w Motorcycles Automobiles Which of the following is true about inflationary 37. Which of the following is an assumption to cost-push inflation in the short run? underlying an upward-sloping short-run Country X 50 OR xpectations? 80 aggregate supply curve? (A) A decrease in labor productivity Country Y 75 OR A) The actual unemployment rate equals the 40 natural rate of unemployment if the (A) The economy is experiencing high inflation. B) A decrease in income tax rates (C) A decrease in consumers' and businesses' actual inflation rate exceeds the expected B) The economy is at full employment. optimism about future economic activity 30. The table above shows the quantity of inflation rate. (C) National income is fixed. A (D) An increase in government deficit spending motorcycles and automobiles produced by (B) The actual unemployment rate equals the D) Wages are sticky. to stimulate a weak economic recovery two countries that use the same amount of natural rate of unemployment when wages (E) The velocity of money is constant. E) Discovery of new sources of energy resources. Which of the following is true? fully adjust to expected inflation. (A) Country X has an absolute and comparative (C) Expectations are always correct in the 8. The short-run Phillips curve implies there short run. is a trade-off between 42. The measured unemployment rate is often advantage in the production of motorcycles. criticized for understating the level of joblessness B) Country X has an absolute and comparative (D) The actual inflation rate is always equal to the expected inflation rate because of labor A) rule making and discretionary policies because advantage in the production of both goods. contracts. B) monetary and fiscal policies C) Neither country has a comparative advantage (A) individuals working in the underground in the production of n The natural rate of unemployment equals (C) inflation and unemployment (D) budget deficits and interest rates economy are counted as employed D) Country Y has an absolute and comparative the inflation rate when the actual inflation (B) individuals working more than one job advantage in the production of automobiles rate equals the expected inflation rate. E) interest rates and investment 39. When Stephanie took out a one-year fixed-rate D are counted more than once Country Y has an absolute and comparative (C) discouraged workers are counted as advantage in the production of motorcycles. Which of the following transactions is included in the financial account of Country X's balance of loan, she expected to pay a real interest rate of unemployed 3 percent. At the end of the year, the real interest (D) discouraged workers are not counted in the 31, Which of the following is an example of how payments accounts? rate had fallen to 2 percent. Which of the labor force the consumer price index (CPI) exhibits bias A) A firm in Country X sells robots to a firm in following could have caused the decrease in the E) part-time workers are counted as unemployed in its estimates of changes in the cost of living? Country A. real interest rate? (A) Energy prices have a higher impact on B) Country X sends financial aid to Country B. 43. An economy is in short-run equilibrium at a level C) An individual in Country X receives dividend (A) There was an increase in the nominal of output that is greater than potential output. If inflation than other input costs do. A payments from a firm in Country C. interest rate. there were no active fiscal or monetary policy B (B) /New products are always overrepresented in the CPI. D) An individual in Country X sends money B) There was a decrease in the nominal intervention, which of the following changes in interest rate. output and the price level would occur in the C) The CPI assigns greater weight to measures monthly to family members in Country D. of welfare than it does to economic activity. (E) An individual in Country X buys new There was a decrease in the money supply. long run? (D) The actual inflation rate was greater than the (D) Product improvements are not always fully government bonds issued by Country E expected inflation rate. Output Price Level reflected in the calculation of the CPI. (E) The CPI adjusts for the substitution of less 35. Assume a country's government increases taxes E) The actual inflation rate was less than the expected inflation rate. (A) Increase Decrease and its central bank decreases the money supply B) Increase Increase expensive goods by consumers. The actions will result in an increase in which C) Decrease Decrease 32. of the following in the short run? 40. A continuous increase in the consumer price Fred Jones withdraws $1,000 in cash from his (D) Decrease Increase index (CPI) is (E) No change No change savings account. What immediate effect does A) Aggregate demand this transaction have on the monetary aggregate B) Aggregate supply (A) deflation measures of MI and M2 ? ") Investment spending B) stagflation D Unemployment Cyinflation MI M2 E) Inflation (D) recession (A) Increases Decreases E) disinflation B) Increases No change 36. When there is excess demand in the loanable C) Decreases No change funds market, which of the following will occur? D) No change Decreases (E) No change No change (A) National savings will exceed investment spending. B) The economy will remain at full C employment. C) Real interest rates will increase. D) An inflationary gap will exist. (E) The money supply will increase. any part of this page is illegal Unauthorized copying or reuse of GO ON TO THE NEXT PAGE. any part of this page Is Illegal. GO ON TO THE NEXT PAGE. -9. -10-Production Point Shirts Country X's government increases its spending Chairs 52 without raising taxes. Which of the following is Assuming no government policies, which of the 55. Assume that the United States current account 20 true about the effect on Country X's real interest following will occ balance is zero. If the United States dolla 0 unemployment rate exceeds the natural rate of appreciates against the Japanese yen, then B rates and its subsequent effect on Country X's net 16 exports? unemployment? demand for United States exports will C 12 (A) Prices will increase. A) increase and result in a deficit in the 2 (A) Real interest rates increase and net exports (B) Unemployment will increase. United States financial account D 8 increase. D (C) Wages will fall. B) increase and result in a surplus in the E B) Real interest rates increase and net exports (D) Aggregate demand will increase. United States financial account decrease. E) Long-run aggregate supply will decrease. () decrease and result in a surplus in the A C) Real interest rates increase with no change in United States financial account net exports. 53/ Assume that the market for bottled water is in D) decrease and result in a deficit in the D) Real interest rates decrease and net exports quilibrium. If both the supply of and the demand United States financial account The table shows the production possibilities for increase. or bottled water decrease, what will be the effect (E) remain unchanged because the surplus Country X in producing shirts and chairs when it E) Real interest rates decrease and net exports on equilibrium price and quantity? in the current account will be offset uses all its available resources. The opportunity decrease. by the deficit in the financial account cost of producing one additional chair is Price Quantity (A) zero .Which of the following shifts the money demand A) Decrease Decrease the government decreases spending while B) constant curve to the right? B) Decrease Increase the country's central bank buys bonds on the (C) increasing (A) An increase in the price level B C) Increase Decrease pen market, which of the following will definitely occur? D) decreasing B) A decrease in the price level D) Increase Indeterminate (E) indeterminate D (C) An increase in interest rate E) Indeterminate Decrease A) The aggregate demand curve will shift to D) A decrease in interest rates 54 An increase in government spending that is the right. 45. An increase in which of the following will most ) A decrease in the nominal gross domestic product inanced by an equal increase in taxes results likely cause an increase in aggregate demand and in which of the following changes in aggregate B (B) The aggregate demand curve will shift to the left. inflation in the short run? 50 demand (AD) and short-run aggregate supply C) The short-run aggregate supply curve will An increase in the money supply will result in an (SRAS) curves? shift to the right. (A) Income tax rates ncrease in D) Interest rates will fall (B) Input prices AD Curve SRAS Curve E) Interest rates will rise C) Government spending (A) output in the short run and in the long run D) Real interest rates 3) inflation in the short run and an increase in (A) Shifts to the right Shifts to the right E) Savings output in the long run B) Shifts to the left Shifts to the left 57. Which of the following best illustrates rising B (C) inflation in the short run and no change in A C) Shifts to the right No change productivity? If the central bank of a country wishes to maintain output in the long run D) Shifts to the left No change A) An expansion of the labor force a stable nominal interest rate after a decrease in D) output in the long run but not in the short run E) No change No change B) An increase in the value of financial capital consumers' spending, taking which of the E) output in the long run and no change in D (C) A decrease in the amount of physical capital following actions will achieve the goal? inflation in the short run per worker (D) A decrease in the amount of labor needed to (A) Increasing government spending 51. Which of the following is an example of frictional produce a unit of output D B) Increasing income tax rates unemployment? (E) An increase in the amount of resources (C) Decreasing the required reserve ratio required to produce a certain level of output (D) Decreasing the discount rate (A) A former mayor doing volunteer work E) Selling government bonds (B) A factory worker who loses her job because of recession 47. Investment in physical capital is most likely to D C) A college student working part-time at the occur as a result of an increase in (D) campus bookstore A college graduate interviewing for two A) interest rate available positions B) inflation rates E) An architect whose job is replaced by (C) business confidence computer software that designs buildings DJ money demand E) personal consumption Unauthorized copying or reuse of any part of this page is Illegal. Unauthorized copying or reuse of GO ON TO THE NEXT PAGE. any part of t GO ON TO THE NEXT PAGE. -11- -12