Assume a nation has a fixed exchange rate, and the central bank decreases the reserve requirement. What is the net effect on the money supply (given)? Answer assuming all the adjustments have worked their way through the macroeconomic system, and it is in equilibrium.
a. The change in the money supply is ambiguous.
b. The money supply can not change. This is an example of the Impossible Trilogy.
c. The money supply rises.
d. The money supply falls.
Question 2 - If there is an improvement in technology that affects only Aggregate Supply and a nation's wealth falls due to a sagging stock market, then:
a. Price index falls, and the change in real GDP is uncertain.
b. The change in price index is uncertain, and real GDP rises.
c. The change in price index is uncertain, and real GDP falls.
d. Neither the price index nor real GDP changes.
e. Price index rises, and real GDP rises.
Question 3 - Assume a nation has a fixed exchange rate, and the central bank lowers the discount rate. What is the net effect on the unemployment rate? Answer assuming all the adjustments have worked their way through the macroeconomic system, and it is in equilibrium.
a. The unemployment rate rises.
b. The unemployment rate falls.
c. The unemployment is not affected.
d. The change in the unemployment rate depends on the degree of international capital mobility.
Question 4 - If there is an improvement in technology that affects only Aggregate Supply and a nation's wealth falls due to a sagging stock market, then:
a. Price index falls, and real GDP rises.
b. Price index falls, and the change in real GDP is uncertain.
c. Price index falls, and real GDP falls.
d. The change in price index is uncertain, and real GDP rises.
e. The change in price index is uncertain, and real GDP falls.
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