HW-4 - 1 Homework 4, Chapters 9-12 (10/11/07) DUE IN CLASS...

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1 Homework 4, Chapters 9-12 (10/11/07) DUE IN CLASS ON WEDNESDAY OCTOBER 24 Chapter 9 [1]The economic expansion that began in 1991 1. lasted approximately five years 2. lasted approximately twelve years 3. is still ongoing 4. was the longest expansion in U.S. history [2]In Freedonia there is an increase in the real price of a key raw material, say, for example, oil. Using the analysis developed in class, in the classical model which of the following occurs? 1. The will be an increase in the demand for labor. 2. There will be a decrease in equilibrium output. 3. There will be an increase in the equilibrium real wage. 4. Each of 1-3 will occur. 5. Neither of 1-3 will occur. [3]Which of the following is a false statement? 1. In terms of the decline in real output, the Great Depression was more severe in the U.S. than in the rest of the world. 2. In comparison with the rest of the world the U.S. recovery from the Depression was relatively slow. 3. Without fear of contradiction it can be said that FDR’s New Deal pulled the economy out of the Great Depression. 4. Each of 1-3 is true. 5. Neither of 1-3 is true. Chapter 10 [4]Suppose each of the following news items appears on the evening news. Which one event would most likely cause consumption spending to increase? 1. “Government to Issue Tax Rebates at the End of Next Month” “ 2. “Government to Increase Taxes with the Start of the Next Quarter” 3. “Stock Market Drops 10%” 4. Layoffs Reach Record High” [5]If the MPC is 0.7 and disposable income shrinks by $100 million, consumption would 1. rise by $7 million 2. rise by $70 million 3. fall by $70 million 4. fall by $7 million
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2 Use the following graph to answer 6-8. d Y (aggregate expenditures) d Y (AE) $300 Y* Y In Freedonia the aggregate expenditure line crosses the vertical axis at $300 (in real dollars). The MPC is 2/3. [6]Equilibrium output in Freedonia is _____. (1)$200.
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HW-4 - 1 Homework 4, Chapters 9-12 (10/11/07) DUE IN CLASS...

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