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5. 100 200 300 400 500 Column A AColumn B BColumn C CColumn D DColumn E E Column F

6. A 100

7. Draw the regular D and S graph. Draw a dot showing a decrease in P and a decrease in Q Figure out what could have caused that by drawing in the lines. Decrease in demand and no change in supply A 100

8. A 200

9. If the budget deficit increases—(more spending than taxes in a given year) it will increase the gov.’s demand for loans. If the gov., increases demand for loans, IR will increase. A 200

10. 1.Suppose that in an economy with lump- sum (disregard) taxes, autonomous (disregard) investment spending increases by $10 million. If the marginal propensity to consume is 0.8, equilibrium gross domestic product will change by a maximum of: 2.New scenario, taxes decrease by the same amount assuming the same MPC A 300

11. 1.Spending multiplier: 1/MPS 1/.2=5 5 * positive 10 million= 50 million increase 2.Tax multiplier: -MPC/MPS -.8/.2= -4 -4 * negative (decrease) $10 million= 40 million increase A 300

12. A 400

13. A-D will increase the productivity of labor. Just because the labor force increases does not necessarily mean that they will be more productive. However, all A-E would shift the PPC outward and the LRAS to the right. Why? They are all an increase in resources. A 400

14. A 500

15. MPC is the change in spending brought by a change in income. If income increases by 10,000 and the MPC is point.8, then consumption will increase by 8,000 A 500

16. B 100

17. Most of you know that inside is inefficient or unemployment, on the line is (productively efficient, and outside is currently unattainable. Missed on last test—only one point of the curve represents the best mix of goods. B 100

18. B 200

19. If set at a balanced budget at full employment, then—deficit during recession (more spending, less taxes) and surplus during inflation B 200

20. B 300

21. C

22. B 400

23. If a decrease in exports, the AD will decrease. Find a FISCAL POLICY that will increase AD.-- B B 400

24. B 500

25. C

26. C 100

27. D

28. C 200

29. E

30. C 300

31. Best answer is C. Choice A could increase economic growth b/c an increase in population is an increase in resources, but would probably not increase per capita RGDP, which is the best measure of the standard of living. C 300

32. DAILY DOUBLE C 400 DAILY DOUBLE Place A Wager

33. C 400

34. B

35. C 500

36. MPC is.9 Then, MPS is.1 Gov spending increases by $100, but exports decrease by $60. So, $40 injection. 1/.1=10 10 x 40=400--B C 500

37. D 100

38. A

39. D 200

40. C

41. D 300

42. D

43. D 400

44. B

45. D 500

46. Down the Phillips Curve=decrease in AD B D 500

47. E 100

48. E Talk about LRAS, LRPC, and PPC E 100

49. E 200

50. Correct Response Two E E 200

51. Question Number Three E E 300

52. B

53. Question Number Four E E 400

54. SRAS decreases--A E 400

55. E 500

56. A

57. F 100

58. D

59. F 200

60. C

61. F 300 Draw crowding out. 1.Show an economy in a recession in one color. 2.After expansionary fp, what happens to AD/ 3.Due to expansionary FP, what happens to the budget? 4.Draw the loanable funds graph. What happens as a result of #3. What happened to the RIR? 5.What will happen to interest-sensitive consumption spending and businesses’ purchase of capital goods (AD)? 6.What will happen to long-run growth?

62. F 300

63. F 400 1.Draw an economy in full employment equilibrium. 2.Businesses’ inflationary expectations increase. What happens to SRAS? 3.What happened to inflation? 4.What happened to REAL wages? Take note--In the SR—nominal wages stay the same (unless other wise stated). 5.After #2, show the change in the Phillips Curve

64. F 400

65. F 500 1.Does unanticipated inflation help net creditors or net debtors? EXPLAIN. Net—after subtracting EX. My husband and I owe $100,000 on our student loans and $140,000 on our house. If we have $10,000 in savings (our saving are loaned out to others), then we are NET DEBTORS by $230,000.

66. F 500

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