another sample final

another sample final - 1. 2. 3. 4. 5. 6. 7. 8. 9. Some...

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Some firms do not instantly adjust the prices they charge in response to changes in demand for all of the following reasons except : a. it is costly to alter prices. b. they do not want to annoy their frequent customers. c. some labor unions demand steady prices. d. some prices are set by long-term contracts between firms and customers. 2. In the Mundell-Fleming model, the domestic interest rate is determined by the: a. intersection of the LM and IS curves. b. domestic rate of inflation. c. world rate of inflation. d. world interest rate. 3. In the Mundell-Fleming model on a Y - e graph, the curves labeled IS * and LM * are labeled that way as a reminder that: a. the price level is held constant at the world price level p *. b. the interest rate is held constant at the world interest rate r *. c. the exchange rate is held constant at the world exchange rate e *. d. output is held constant at the full employment level. 4. According to the Keynesian-cross analysis, if MPC stands for marginal propensity to consume, then a rise in taxes of ? T will: a. decrease equilibrium income by ? T . b. decrease equilibrium income by ? T /(1 – MPC ). c. decrease equilibrium income by ( ? ? ? ? T )( MPC )/(1 – MPC ). d. not affect equilibrium income at all. 5. In the Keynesian-cross model, a decrease in the interest rate _________ planned investment spending and ____________ the equilibrium level of income. a. increases; increases b. increases; decreases c. decreases; decreases d. decreases; increases 6. The short-run Phillips curve: a. shifts upward if expected inflation increases. b. shifts upward if expected inflation decreases. c. shifts downward if expected inflation increases. d. is vertical. 7. The assumption of adaptive expectations for inflation means that people will form their expectations of inflation by: a. taking all information into account using the best economic model available. b. asking the opinions of experts. c. basing their opinions on recently observed inflation. d. flipping a coin. 8. 8. In a small open economy with a floating exchange rate, if the government adopts an expansionary fiscal policy, in the new short-run equilibrium: a. income and the exchange rate will both rise. b. the exchange rate will rise, but income will remain unchanged. c. income will rise, but the exchange rate will remain unchanged. d. both income and the interest rate will rise. 9. 9. If the short-run aggregate supply curve is horizontal, and, if each member of the general public chooses to hold a larger fraction of his or her income as cash balances, then: a. output and employment will increase in the short run. b. output and employment will decrease in the short run. c.
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This note was uploaded on 11/17/2009 for the course ECO 121212 taught by Professor Smith during the Spring '09 term at Culver-Stockton.

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another sample final - 1. 2. 3. 4. 5. 6. 7. 8. 9. Some...

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