econ 410 hw4

econ 410 hw4 - Homework #4 (Chapter 9, 10 and 11) (ECON...

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Page 1 Homework #4 (Chapter 9, 10 and 11) (ECON 410, Spring 2011) (Due 4/14, Thursday, in class) (A) Multiple Choice Questions: (3 points per multiple choice problem), 25 questions. 1. In the Economic Stimulus Tax Rebate in 2008, people would get $600 from the government. This is a policy most consistent with: A) supply side proposals to improve workers' incentives. B) Monetarist monetary policy to increase the money supply. C) policies to move the economy to the Golden Rule level of output. D) Keynesian proposals to stimulate aggregate demand. 2. If the IS curve is given by Y = 1,700 - 100 r and the LM curve is given by Y = 500 + 100 r , then equilibrium income and interest rate are given by: A) Y = 1,100, r = 6 percent. B) Y = 1,200, r = 5 percent. C) Y = 1,000, r = 5 percent. D) Y = 1,100, r = 5 percent. 3. A difference between the economic long run and the short run is that: A) the classical dichotomy holds in the short run but not in the long run. B) monetary and fiscal policy affect output only in the long run. C) demand can affect output and employment in the short run, whereas supply is the ruling force in the long run. D) prices and wages are sticky in the long run only. 4. When the Federal Reserve increases the money supply, at a given price level the amount of output demanded is ______ and the aggregate demand curve shifts ______. A) greater; inward B) greater; outward C) lower; inward D) lower; outward 5. If the long-run aggregate supply curve is vertical, then changes in aggregate demand affect: A) neither prices nor level of output. B) both prices and level of output. C) level of output but not prices. D) prices but not level of output.
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Page 2 6. A 5-percent reduction in the money supply will, according to most economists, reduce prices 5 percent: A) in both the short and long runs. B) in neither the short nor long run. C) in the short run but lead to unemployment in the long run. D) in the long run but lead to unemployment in the short run. 7. Assume that the economy starts from long-run equilibrium. If the Federal Reserve increases the money supply, then ______ increase(s) in the short run and ______ increase(s) in the long run. A) prices; output B) output; prices C) output; output D) prices; prices 8. If consumption is given by C = 200 + 0.75( Y - T ) and investment is given by I = 200 - 25 r , then the formula for the IS curve is: A) Y = 400 - 0.75 T - 25 r + G . B)
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This note was uploaded on 02/13/2012 for the course ECON 410 taught by Professor Hernandez-verme during the Spring '08 term at Texas A&M.

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econ 410 hw4 - Homework #4 (Chapter 9, 10 and 11) (ECON...

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