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Quiz_8-solutions econ 410

Quiz_8-solutions econ 410 - B Housing prices did not fall...

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Quiz 8 4/7/2011 1. November 3, 2010, Fed announces that it will buy $600 billion more in government bonds by the middle 2011. This would most likely lead to: A) IS curve shifts to the right but LM curve does not change. B) LM curve shifts to the left but IS curve does not change. C) IS curve shifts to the right but LM curve shifts to the left. D) Shifting IS and/or LM curves do not shift the aggregate demand curve. Solutions: This question has problem. No answer is correct. The correct choice should be: LM curve shifts to RIGHT but IS curve does not change. Everybody gets credit for this question. 2 A major differences between the current crisis and the Great Depression is: A) Stock prices did not fall during the Great Depression.
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Unformatted text preview: B) Housing prices did not fall during the Great Depression. C) More banks failed during this crisis than the Great Depression. D) The FDIC prevented many banks from failures during this crisis compared with the Great Depression. Solutions: D) (instead of C) – earlier version of this solutions had this wrong). 3. 911 Terrorist Attack most likely lead to: A) a destruction of capital stock so national wage level rose. B) IS curve to shift left because the increased uncertainty reduced investment. C) LM curve to shift left because it destroyed a lot of assets. D) IS curve to shift left because government increased military spending. Solutions: B)...
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