Answers+to+Review+Section+Questions+for+Midterm+2

Answers+to+Review+Section+Questions+for+Midterm+2 - Review...

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Review Section Questions for Midterm 2 Part 1 Multiple Choice 1. Which of the following would shift the Aggregate Demand Curve to the left? A. An increase in taxes B. An increase in government spending C. An increase in the price level D. An increase in investment E. Both (A) and (C) 2. The short-run run refers to a period A. less than 1 year B. greater than 1 year but less than 5 years C. in which prices are flexible D. in which prices are inflexible 3. Stagflation in the short run, a period of falling output coupled with rising prices could most easily result from a(n) A. increase in the money supply B. increase in the price of oil
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C. decrease in the price of oil D. decrease in stock of capital 4. An increase in government purchases will: a. shift the AD curve to the left and decrease both output and the level of prices in the short-run. b. shift the AD curve to the right and increase output but leave the level of prices unchanged in the short-run. c. shift the AD curve to the left and decrease the level of prices but leave output unchanged in the long-run. d. shift the AD curve to the right and increase the level of prices but leave output unchanged in the long-run. 5. Automatic stabilizers largely eliminate A. the business cycle B. active policy C. the outside lag D. the inside lag 6. Which of the following is NOT a government outlay? A) Purchases of foreign bonds B) Social Security C) Interest on the government’s debt
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D) Discretionary spending 7. An decrease in the marginal propensity to consume will
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Answers+to+Review+Section+Questions+for+Midterm+2 - Review...

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