Econ Quiz #5.doc - PRINCIPLES OF MACROECONOMICS QUIZ #5...

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PRINCIPLES OF MACROECONOMICSQUIZ #5 ANSWERS – COVERING CHAPTERS 12-14DUE BACK ON WEDNESDAY, NOVEMBER 25THPLEASE EMAIL YOUR QUIZ ANSWERS TO YOUR TA AT THE FOLLOWINGADDRESS:[email protected]INSTRUCTIONS:Please show your work / explain your answers or you will lose credit.1.Describe the chain of events that are likely to unfold when the government increasesspending. Explain your answer in terms of its impact on aggregate output, the demandfor money, the interest rate and planned investment.
What is the crowding out affect? How can it be fixed?
2.Using the short-hand symbols MS, r, I, Y, and Md to demonstrate the effects of anexpansionary monetary policy. What are the 4 Federal Reserve actions that canincrease the MS and lower the interest rate back down?
3.The AD curve has a negative slope (downward-slope). When the price level (PL) increases –what impact this has on interest rates and Investment (I)
4.Discuss how the consumption link provides another explanation for the downward-slopingaggregate demand curve.

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Term
Spring
Professor
McElroy

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