Economics 1B Quiz 7 S2011

Economics 1B Quiz 7 S2011 - Economics 1B Quiz#7 Department...

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Quiz #7 Department of Economics Professor Siegler UC Davis Spring 2011 1. Suppose that an economy is currently not in short-run equilibrium (spending balance) and Y<PAE. In this case, there would be an unexpected _________ in inventories, which would provide a signal to firms to _________ production. A) decrease; decrease B) increase; increase C) increase; decrease D) decrease; increase 2. In order for the aggregate demand (AD) curve to be downward-sloping, A) there has to be an inverse relationship between the real interest rate and real GDP and a positive relationship between inflation and the real interest rate. B) there has to be a positive relationship between the real interest rate and real GDP and a negative relationship between inflation and the real interest rate. C) there has to be an inverse relationship between the real interest rate and real GDP and an inverse relationship between inflation and the real interest rate. D) there has to be a positive relationship between the real interest rate and real GDP and a positive relationship between inflation and the real interest rate. E) there has to be an inverse relationship between the real interest rate and real GDP but there cannot be a relationship between inflation and the real interest rate. 3. The positive correlation between real interest rates and inflation is best explained by examining A) the behavior of the government. B) forces of supply and demand. C) the behavior of the market. D) the behavior of central banks. E) equilibrium in the economic fluctuations model. 4. When the Fed wants to raise nominal interest rates, it A) increases bank reserves. B) orders all banks to increase interest rates. C)
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Economics 1B Quiz 7 S2011 - Economics 1B Quiz#7 Department...

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