Question 1: Which of the following will block an increase in the money supply from increasing real GDP (presumably to fight a recession).

A. A situation in which business investment is completely insensitive to interest rate changes.

B. A situation in which the money demand curve is negatively sloping.

C. A situation in which an increase in money supply causes a decrease in interest rates.

D. A situation in which business investment is negatively related to the interest rates

E. A situation in which aggregate demand is negatively sloping.

Question 2: Suppose the price of a good is $100 at the beginning of the year. Suppose also that the price of this good increases at exactly the same rate as inflation. If the inflation rate is 10% per month (getting one tenth again larger each month), approximately how much will this good cost at the end of the year?

A. $110

B $220

C. $230

D. $256

E. $314

Question 3: Country A can produce one outfit in 6 hours and one unit of corn in 2 hour. Country B can produce one outfit in 16 hours and one unit of corn in 6 hours. Which of the following statements is true?

A. Country B has an absolute advantage in the production of both corn and outfits.

B. Country B has a comparative advantage in corn and will specialize in the production of corn if trade opens.

C. If trade opens, B will tend to specialize in the production of outfits while A will tend to specialize in the production of corn- then gains from trade would typically be possible.

D. Country A has a comparative advantage in outfits.

E. None of the above.