Quiz5_Questions.doc - PRINCIPLES OF MACROECONOMICS QUIZ#5...

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PRINCIPLES OF MACROECONOMICS QUIZ #5 ANSWERS – COVERING CHAPTERS 12-14 INSTRUCTIONS: Please show your work. Each question is worth 3 points each. On the day that the quizzes are due, you will grade your own quiz in class and then turn it in to me at the end of class. We will be going over the quiz together. The answer key will be posted in eLearning after the quiz is handed in. Please bring a red pen to class on grading day . I expect everyone to uphold their academic excellence and grade there quizzes honestly – there is zero tolerance with respect to academic dishonesty. Late quizzes will receive a zero. However, if you cannot make it to class, please email your quiz to the TA and he will grade it. 1. Describe the chain of events that are likely to unfold when the government increases spending. Explain your answer in terms of its impact on aggregate output, the demand for money, the interest rate and planned investment. What is the crowding out affect? How can it be fixed? 2. Using the short-hand symbols Ms, r, I, Y, and Md to demonstrate the effects of an expansionary monetary policy.
3. Explain aggregate quantity-demanded (AD Curve) falls when the price level increases and the impact this has on interest rates and Investment (I) 4. Discuss how the consumption link provides another explanation for the downward-sloping aggregate demand curve.

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