Problem Set _5

Problem Set _5 - Name: _ (Last name, first name) SID: _...

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Name: _________________________ (Last name, first name) SID: _________________________ GSI: _________________________ UGBA 101B Macroeconomic Analysis for Business Decisions Professor Steven Wood Summer 2010 Problem Set #5 Due: August 10, 2010 (at the beginning of class) Please sign the following oath: The answers on this problem set are entirely my own work. I neither copied from the work of others nor allowed others to copy from my work. _______________________________________ Signature Any problem set turned in without a signature will be assigned a grade of zero. Problem Set Instructions 1. When drawing diagrams, clearly and accurately label all axis, lines, curves, and equilibrium points. 2. Graphs and equations MAY be drawn by hand. 3. Explanations MUST be word-processed. Your explanations should be succinct and to the point. Problem Set #5 1/11
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A. Multiple Choice Questions (30 points) . Circle the letter corresponding to the best answer. (3 points each.) 1. A decrease in the money supply causes the real interest rate to _____ and the price level to _____ in general equilibrium. a. Increase, increase. b. Increase; decrease. c. Decrease; decrease. d. Remain unchanged; decrease. 2. Which of the following changes would shift the SRAS curve up? a. An increase in the labor force. b. An increase in production costs. c. An increase in the money supply. d. An increase in government purchases. 3. When the money supply declines by 10%, economic output _____ and the price level _____ in the long run. a. Declines; falls. b. Is unchanged; falls. c. Declines; is unchanged. d. Is unchanged; is unchanged. 4. One difficulty faced by policymakers who wish to use the unemployment rate as a guide to whether the economy is weak or strong is that: a. The natural rate of unemployment is hard to measure. b. The natural rate of unemployment almost never changes. c. The impact of policy on the economy is subject to long and variable lags. d. Policymakers must use data on output to tell whether the unemployment rate is too high or too low. 5. The sacrifice ratio is: a. The amount of output lost when the inflation rate is reduced by one percentage point. b.
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Problem Set _5 - Name: _ (Last name, first name) SID: _...

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