PS6 - Economics 102 Problem Set 6 1. Multiple choice: 1....

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Economics 102 Problem Set 6 1. Multiple choice: 1. Growth in potential GDP is usually represented by a. A shift in the aggregate demand curve up slightly and to the right. b. A shift in the aggregate demand curve up and slightly to the left. c. A shift in the aggregate supply curve to the right. d. A shift in the aggregate supply curve to the left. e. None of the above. 2. Monetary policy is most likely to result in high GDP growth when the aggregate supply curve is a. Vertical and the Fed lowers the discount rate. b. Vertical and the Fed raises the reserve requirement. c. Horizontal and the Fed sells securities. d. Horizontal and the Fed lowers the required reserve ratio. 3. The money-supply multiplier assumes that: a. All new money is deposited in checking accounts. b. Individuals do not retain cash balances. c. Banks do not hold excess reserves. d. All of the above. e. None of the above. 4. The aggregate supply curve is likely to be fairly flat at low levels of aggregate output because a. Interest rates are very low and therefore investment will be increasing. b. Aggregate demand is low. c. At low levels of output, the additional cost of producing more output is likely to be small. d. Prices and wages are below their equilibrium levels. 5. According to the (short-run) Phillips curve, if policy makers want to reduce the unemployment rate, they must accept a. A lower inflation rate. b. A higher inflation rate. c. A reduction in aggregate demand. d. A reduction in aggregate supply. 6. Doubts about the nature and the existence of a negatively sloped Phillips Curve arose in the 1970s when the economy experienced a. Simultaneously high rates of inflation and unemployment.
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b. Simultaneously low rates of inflation and unemployment. c. A high rate of unemployment, along with a low rate of inflation. d. A high rate of inflation, along with a low rate of unemployment. e. No inflation at all for several years. 7. The natural rate of unemployment is usually thought to be the sum of a. Frictional unemployment and cyclical unemployment. b. Cyclical unemployment and structural unemployment. c. Frictional unemployment and structural unemployment. d.
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PS6 - Economics 102 Problem Set 6 1. Multiple choice: 1....

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