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another sample final - 1 2 3 4 5 6 7 8 9 Some firms do not...

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1. 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: 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: 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. 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: 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:
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