Question 1 Assume that nominal income increases by 5% and the price level increases by 3%, which of the following is true? Real GDP must have decreased. The impact on real GDP is indeterminate The percentage increase in real GDP must exceed the percentage increase in the price level. Real GDP increased by approximately 2%. If the price level increased by 3%, nominal GDP must increase by less than 3%, not by 5% Question 2 The basic money supply, M1, is defined as the value of O currency in circulation plus bank reserves demand deposits plus savings accounts currency in circulation plus existing government bonds currency in circulation plus demand deposits currency in circulation, plus demand deposits, plus saving accountsQuestion 3 If it is assumed that the nominal interest rate is 8% and the expected rate of inflation is 3%, what is the expected real interest rate? O-5% 3% 5% 8% 11% Question 4 Which of the following is true about the supply of loanable funds and interest rates when the government borrows money to finance its budget deficit? The supply of loanable funds and the interest rate both increase The supply of loanable funds decreases and the interest rate increases The supply of loanable funds decreases, but the interest rate remains unchanged. The supply of loanable fu nds increa s. and the interest rate decreases The supply of loanable f mains unchanged, and the interest rate increasesQuestion 5 Which of the following combinations of monetary policy is the most expansionary? O The central bank's selling bonds and lowering the discount rate The central bank's buying bonds and Congress increasing government spending Congress lowering taxes and increasing government spending The central bank's lowering the required reserve ratio and lowering the discount rate The central bank buying bonds and increasing the required reserve ratio Question 6 Which statement explains the shape of the long-run aggregate supply curve (LRAS)? It is vertical and parallel to the y-axis because in the long run, the total output is not dependent on price level It is horizontal and parallel to the x-axis because in the long run, the total output is dependent on price level It is upward sloping because it is affected by the price level It is a downward-sloping curve because it is affected by the price level here the price is flexibleQuestion 7 Use the following graph to answer the question that follows. Price Level SRAS X Y Real GDP Which of the following represents the relationship between inflation and unemployment in the short run? O Changes in the price levels do not motivate producers to change their production level Higher price levels motivate producers to produce less, and that represents the inverse relationship between inflation and unemployment Higher price levels motivate producers to produce more, and that represents the inverse relationship between inflation and unemployment Lower price levels motivate producers to produce less, and that represents the direct relationship between inflation and unemployment > Lower price levels motivate producers to produce more, and that represents the invers relationship between inflation and unemployment.Question 8 What is the maximum amount of possible loans that banks are able to give out from any deposit? The excess reserve divided by the monetary base O The excess reserve multiplied by the monetary base O The excess reserve multiplied by the money multiplier The fractional reserve divided by the money supply O The fractional reserve multiplied by money multiplier Question 9 Which is the most expansionary combination of fiscal policies? increasing taxes and increasing government spending Decreasing government transfer payments and increasing government spending Decreasing taxes and increasing government spending Decreasing government spending and increasing the money supply Decreasing the money supply and increasing taxesQuestion 23 Which of the following is considered an automatic stabilizer? OA discretionary increase in government spending O A decrease in the wage rate when there is cyclical unemployment An increase in income tax rates to fight inflation Unemployed workers collect unemployment insurance benefits when they become unemployed A simultaneous increase in government spending and taxes to fight unemployment with a balanced budget Question 24 How is economic growth best described or summarized? An increase in the current level of real GDP A decrease in the unemployment rate An increase in the long-run aggregate supply curve An inward (or leftward) shift of the Philips curve An inward s possibilities frontier\fQuestion 27 Why do economists state the unemployment rate tends to underestimate the inadequacy of labor market opportunities? The unemployment rate does not include the discouraged workers who have ceased looking for a job The unemployment rate does not include those who retired before reaching 65 years of age The unemployment rate is not adjusted downward for people who are working overtime. The unemployment rate does not include full-time students who have no job The unemployment rate does not include senior citizens who have no work but are seeking employment. Question 28 Which of the following is true, with respect to the relationship between and the long-run aggregate supply curve (LRAS)? The LRAS is negatively related to th possibili The LRAS is vertical whereas the production possibility curve i concave to the origin! here is no such relationship The LRAS represents PC PCIs a downward