Q6. Following the IS curve: 17} = (1 HR; f), suppose we assume (1 = 0, 5 = 1/2, Hi = f = 2% and the real interest rate rises to R; = 6%. According to the IS curve the economy would, in the short run: a) remain at its long-run equilibrium b] move from 1 percent below its potential to its long-run equilibrium. c) move from its long-run equilibrium to 2 percent below its potential d) move from its long-run equilibrium to 2 percent above its potential. Q7. The implication of Ricardian equivalence is that if the government increases expenditures without increasing taxes, the increase in government expenditures will be: a) enhance by an increase in consumer spending. b) enhanced by the multiplier effect c) offset by a reduction in consumer spending. d] instantly offset by automatic stabilizers. Q8. Government spending designed to mitigate short-run uctuations by passing legislations is called? a) automatic stabilization b] discretionary spending c) unemployment insurance d) monetary policy. Q9. Suppose the lowest level of the output gap during the Great Recession was -6 percent in July 2009. Many people believe that the multiplier used in the IS curve was 1.8. If that's true, what is 5?: a) 0.28 b) 0.22 c) 0.33 d) 0.44 Q10. Suppose the lowest level of the output gap during the Great Recession was -6 percent in July 2009. Many people believe that the multiplier used in the IS curve was 1.8. Assume Rt = 'F and that monetary policy is not being used, what would the percent change in government expenditure be to close this gap in short run output? a) 3.14 b) 4.97 c) 3.33 d) 5.60