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1 Name: ______ ANSWERS ______ (Last name, first name) SID: _____________________ Lecture: _____________________ UGBA 101B Macroeconomic Analysis for Business Decisions Dr. Steven Wood Fall 2003 EXAM #3 Please sign the following oath: The answers on this test are entirely my own work. I neither gave nor received any aid while taking this test. I will not discuss the questions on this test until after 5:00 p.m. on November 4, 2003. ______________________ Signature Any test turned in without a signature indicating that you have taken this oath will be assigned a grade of zero. Do not open this test until instructed to. You have until the end of class to complete this test. Good Luck.

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2 A. Multiple Choice. Circle the letter that corresponds to the best answer. (30 points.) 1. The aggregate demand curve: a. Is a downward sloping relationship between the interest rate and output. b. Is an upward sloping relationship between the interest rate and output. c. Is a downward sloping relationship between the price level and output. d. Is an upward sloping relationship between the price level and output. 2. According to the interest rate effect, an increase in the price level: a. Increases real money balances and reduces interest rates. b. Increases real money balances and raises interest rates. c. Decreases real money balances and reduces interest rates. d. Decreases real money balances and raises interest rates. 3. If the interest rate effect becomes stronger, the aggregate demand curve: a. Becomes flatter. b. Becomes steeper. c. Shifts out. d. Shifts in. 4. A reduction in the multiplier causes the aggregate demand curve to: a. Become flatter. b. Become steeper. c. Shift out. d. Shift in. 5. Which of the following factors will not shift the aggregate demand curve: a. A change in the price level. b. A change in tax rates. c. A change in autonomous consumption. d. A change in the money supply.
3 6. The aggregate supply curve shows how: a. Aggregate demand changes when the price level changes. b. The price level changes in response to changes in aggregate demand. c. Aggregate supply responds to changes in interest rates. d. Aggregate supply adjusts to changes in wages and other input costs. 7. Which of the following factors shifts the aggregate supply curve down? a. An increase in inflationary expectations. b.

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