Please help me with the following multiple choice questions.

a) Frictional unemployment is defined as

• all unemployment above the natural rate
• unemployment that is cyclical in nature
• the natural unemployment rate minus cyclical unemployment
• unemployment resulting from people shifting between jobs and looking for new jobs
• any unemployment that is above 6%

b) In the medium run, if government purchases are increased and nominal money supply is decreased, we can expect that

• aggregate demand and prices will increase but interest rates will not change
• aggregate demand, prices, and the interest rate will all decrease
• aggregate demand and interest rates will decrease but prices will increase
• the AD-curve will shift to the right and the AS-curve will shift to the left
• the interest rate will increase while aggregate demand and prices may increase, decrease, or remain the same

c) A decrease in real money supply caused by an increase in the price level is graphically represented by

• a shift of the AD-curve to the right
• a shift of the AD-curve to the left
• movement along the AD-curve to the right
• movement along the AD-curve to the left
• a shift of the AS-curve to the right

d) In the classical supply curve case, monetary expansion will

• increase P, lower i, and leave Y unchanged
• increase Y, lower i, and leave P unchanged
• leave Y and i unchanged but increase P
• leave Y, i, and P unchanged
• increase Y, i, and P

e) When nominal money supply is held constant and the price level increases, then

• real money balances increase and real interest rates decrease
• real money balances decrease and real interest rates increase
• real money balances decrease and real interest rates remain the same
• the AS-curve must have shifted to the right
• the AS-curve must have shifted to the left

f) The AS-curve is horizontal or very flat if

• additional resources (especially labour) can be hired to produce additional output with little or no increase in existing prices
• wages fall rapidly with an increase in unemployment, reducing spending and income to restore equilibrium
• firms lower wages less than prices to avoid a loss in profit during a recession
• the nominal wage adjustment occurs fairly rapidly
• nominal wages and prices always change proportionally, leaving the real wage rate unchanged

g) The AD-curve has a negative slope since

• firms will produce less if they have to lower their prices
• lower prices mean higher real wages so firms can no longer afford to produce as many goods and services
• a decrease in the price level increases real money balances, leading to lower interest rates and increased spending
• lower prices drive up the demand for goods since buyers fear future market shortages
• lower prices increase consumer confidence, which encourages spending

h) In the medium run, if government purchases are decreased and nominal money supply is increased, then we can expect that

• aggregate demand will decrease and aggregate supply will increase, leaving the level of output the same
• output, prices, and interest rates will all increase
• output and prices will decrease, while interest rates will increase
• interest rates will decrease, while output and prices may increase, decrease, or remain the same
• aggregate demand will decrease and aggregate supply will decrease, leaving the level of output the same

i) Which of the following is NOT reflected in a shift of the AD-curve?

• a change in real money balances due to a change in the price level
• a change in real money balances due to a change in nominal money supply
• a change in government transfer payments
• a change in the confidence of consumers and businesses
• all of these options will shift the AD-curve

j) In a normal AD-AS diagram with an upward-sloping AS-curve, if the government wanted to maintain a fixed level of output, it would need to respond to a decrease in money supply by

• decreasing government expenditures
• increasing government spending
• urging the central bank to sell bonds in the open market
• increasing income taxes
• decreasing taxes and government spending by the same amount