SQ3_KEY - 1 Sample Questions, Part 3, Chapters 13-14 P (1)...

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1 Sample Questions, Part 3, Chapters 13-14 6/21/06 P (1) P (2) AS AS AD AD FE Y Y FE Y Y P (3) P (4) AS AS AD AD FE Y Y Y In the AS/AD model find the effects of the following changes. The above graphs represent the possibilities, so your choices are (1)Graph 1 (2)Graph 2. (3)Graph 3. (4)Graph 4. (5)None of the above, as the answer cannot be determined without more information. [1]An increase in autonomous investment will cause ___ 1 __. [2]An autonomous increase in the price of a key input into the production process, such as oil, will cause ___ 4 __. [3]An increase in taxes will cause ___ 2 ___. [4]An open market sale by the Fed will cause ___ 2 __. [5]A decrease in nominal wages will cause __ 3 ___. [6]A decrease in government purchases accompanied by an equal decrease in taxes will cause ___ 2 __. (Hint: Find the total effects on A .) [7]A decrease in the discount rate will cause __ 1 ___.
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2 The next two questions deal with the increase in autonomous investment considered in question 1 above. [8]In the short-run AS/AD model as a result of the investment increase , the equilibrium real money supply _____ and the interest rate _____ . 1. increases, increases. 2. increases, decreases. 3. decreases, increases. 4. 5. decreases, decreases. None of the above. The answer cannot be determined without more information. [9]In the long run , as a result of the investment increase , the nominal wage _____ and equilibrium consumption _____. 1. increases, increases. 2. increases, decreases. 3. decreases, increases. 4. 5. decreases, decreases. None of the above. The answer cannot be determined without more information. The next three questions deal with the increase in oil prices considered in question 2 above. [10]In the AS/AD model as a result of the oil price increase, the equilibrium interest rate _____ . 1. remains unchanged. 2. decreases. 3. increases. 4. None of the above. The answer cannot be determined without more information. [11]In the AS/AD model as a result of the oil price increase, equilibrium investment _____ and consumption _____ . 1. increases, increases. 2. increases, decreases. 3. decreases, increases. 4. 5. decreases, decreases. None of the above. The answer cannot be determined without more information. [12]In the long run , as a result of the oil price increase, the nominal wage _____ and the long run, equilibrium interest rate _____. 1. increases, increases. 2. increases, remains unchanged at its old value. 3. decreases, increases. 4. 5. decreases, remains unchanged at its old value. None of the above.
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3 [13]Which of the following sequences results from an increase in the price level? 1. The real money supply curve shifts to the left. 2. The interest rate increases. 3. Investment and consumption demand decrease.
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This note was uploaded on 09/14/2008 for the course ECON 2006 taught by Professor Rdcothren during the Spring '08 term at Virginia Tech.

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SQ3_KEY - 1 Sample Questions, Part 3, Chapters 13-14 P (1)...

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