1. In an effort to increase employment by stimulating investment spending, policymakers would

increase government spending.

increase transfer payments.

purchase US government bonds on the open market.

sell bonds.

increase the federal funds rate.

2. If Congress votes to increase spending and taxes by the same amount, what is the effect on employment and interest rates?

Employment / Interest Rates

Increase / Increase

Increase / Decrease

Increase / No Change

Decrease / Decrease

Decrease / No Change

3. If, as part of supply side policy, Congress votes to decrease business taxes how will output, price level, and real interest rates be impacted?

Output / Price Level / Interest Rates

Increase / Increase / Increase

Increase / Decrease / Increase

Increase / Decrease / Decrease

Decrease / Increase / Increase

Decrease / Decrease / Decrease

4. If the Federal Reserve conducts an open market purchase, we can expect that

the short-run Phillips curve will shift left.

the short-run Phillips curve will shift right.

the long-run Phillips curve will shift right.

there will be a movement to the right along the short-run Phillips curve.

there will be a movement to the left along the short-run Phillips curve.

5. To be counted as unemployed, an individual

cannot hold a paying job.

must have been fired from his job.

might be working part-time but looking for a full-time job.

is actively searching for a job while not working.

is unemployed and has become discouraged because there are no jobs available.

6. If an increase in government purchases of $5 billion causes national income to rise by a total of $25 billion, then the marginal propensity to consume is

.1.

.2.

.5.

.8.

.9.