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Answers to ECN1B Midterm 2 Multiple Choice Version A: 1. C 2. A 3. A 4. C 5. B 6. C 7. A 8. A 9. B 10. D 11. C 12. D 13. D 14. D 15. D 16. C 17. C 18. B 19. C 20. B 21. D 22. C 23. T 24. F 25. T 26. F 27. T 28. F 29. F 30. F 31. T 32. T VERSION B 1. C 2. A 3. A 4. B 5. C 6. A 7. A 8. C

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9. B 10. D 11. C 12. C 13. B 14. D 15. D 16. D 17. C 18. D 19. C 20. D 21. C 22. B 23. F 24. T 25. T 26. F 27. F 28. F 29. T 30. T 31. T 32. F PART III 1. a. Aggregate supply shifted to the right from 2006 to 2007. b. This would be caused by a decrease in oil prices. c. No. Fiscal policy can only shift the AD curve, but to restore price and output to the 2006 levels, SRAS must shift leftward.
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Unformatted text preview: 2. a. Equilibrium income = 80 Trade surplus = -6. b. 2. [1/(1-.5)] c. Trade surplus = 0. New equil. Income = 100. New M = 20. 3. A. AD shifts left. Output and prices decrease. In the long run, SRAS will shift to the right to restore output to its original level (at full employment level of output) and prices will drop further. B. When interest rates increase, the price of the bond will decrease. Use the present value equation. The present value of the bond is its present value....
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