Econ 4081 - Final Exam - Multiple Choice Section - Spring 2013 (take Home Version with answer key) - Multiple Choice Section Answer all parts(50 Marks 1

Econ 4081 - Final Exam - Multiple Choice Section - Spring 2013 (take Home Version with answer key)

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Page 1 Multiple Choice Section: Answer all parts (50 Marks) 1. The classical dichotomy breaks down for a Phillips curve, which shows the relationship between a nominal variable, ______, and a real variable, ______. A) unemployment; inflation B) inflation; unemployment C) output; prices D) money; output 2. The debt-deflation theory of the Great Depression suggests that an ______ deflation redistributes wealth in such a way as to ______ spending on goods and services. 3. Starting from long-run equilibrium, an increase in aggregate demand increases ______ in the short run, but only increases ______ in the long run. 4. According to classical theory, national income depends on ______, while Keynes proposed that ______ determined the level of national income. 5. In the liquidity preference model, what adjusts to move the money market to equilibrium following a change in the money supply? A) the interest rate B) production C) the price level D) planned spending
Page 2 6. The IScurve provides combinations of interest rates and income that satisfy equilibrium in the market for ______, and the LMcurve provides combinations of interest rates and income that satisfy equilibrium in the market for ______. 7. When GDP growth declines, investment spending typically ______ and consumption spending typically ______. 8. One policy response to the U.S. economic slowdown of 2001 was tax cuts. This policy response can be represented in the ISLMmodel by shifting the ______ curve to the ______. 9. According to the imperfect-information model, when the price level rises by the amount the producer expected it to rise, the producer: A) does not change production. B) decreases production. C) hires more workers. D) increases production. 10. The ISLMmodel takes ______ as exogenous.
Page 3 11. Both models of aggregate supply discussed in Chapter 14 imply that if the price level is higher than expected, then output ______ natural rate of output.

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