1. If the government provides subsidies to all manufacturing and agricultural sectors, what would happen to price level and output?

Price Level / Output

Decrease / Indeterminate

Increase / Increase

Increase / Decrease

Increase / Indeterminate

Decrease / Increase

Decrease / Decrease

2. Aggregate demand will decrease for all of the following reasonsexcept

government spending decreases.

personal taxes increase.

business taxes increase.

real interest rates increase.

the discount rate increases.

3. In an economy with a vertical aggregate supply curve, a decrease in taxes will affect price level and employment in which of the following ways?

Price Level / Output

Decrease / Increase

Increase / Increase

Increase / Decrease

Increase / No Change

Decrease / No Change

No Change / Decrease

4. Which of the following combinations of fiscal and monetary policy would be most effective in fixing hyper-inflation in an economy?

Taxes / Government Spending / Discount Rate / Open Market Operations

Decrease / Increase / Increase / Sell

Decrease / Increase / Increase / Buy

Increase / Decrease / Increase / Sell

Decrease / Decrease / Decrease / Buy

Increase / Decrease / Decrease / Sell

5. The idea that if consumers anticipate monetary policy changes there will be no change in GDP is a theory advanced by

monetarists.

Keynesians.

Classical economists.

rational expectationists.

supply side economists.

6. The idea that if consumers anticipate monetary policy changes there will be no change in GDP is a theory advanced by

monetarists.

Keynesians.

Classical economists.

rational expectationists.

supply side economists.

7. The short-run Phillips Curve shows a(n)

inverse relationship between inflation and unemployment.

inverse relationship between inflation and interest rates.

inverse relationship between interest rates and unemployment.

direct relationship between inflation and unemployment.

direct relationship between inflation and interest rates.

8. If Congress decreases taxes and spending by $500, then

AS will decrease by $500.

AD will decrease by $500.

AD will decrease by more than $500.

AS will increase by $500.

AD will increase by $500.

9. If investment spending increases while in the up sloping range of the aggregate supply curve, then

output will decrease.

employment will decrease.

unemployment will decrease.

price level will decrease.

interest rates will decrease.

10. To correct unemployment in the economy, the Federal Reserve might increase

government spending.

taxes.

the discount rate.

the required reserve ratio.

the purchase of bonds.