PRINCIPLES OF MACROECONOMICS
QUIZ #5 ANSWERS – COVERING CHAPTERS 12-14
Please show your work.
Each question is worth 3
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
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.
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?
Using the short-hand symbols Ms, r, I, Y, and Md to demonstrate the effects of an
expansionary monetary policy.
Explain aggregate quantity-demanded (AD Curve) falls when the price level increases and
the impact this has on interest rates and Investment (I)
Discuss how the consumption link provides another explanation for the downward-sloping
aggregate demand curve.