Refer to Figure 27-7. Given that the economy has moved from A to B in the graph above, which of the ...

Refer to Figure 27-7. Given that the economy has moved from A to B in the graph above, which of the following would be the appropriate fiscal policy to achieve potential GDP?
 
  A) increase government spending B) contractionary fiscal policy
  C) increase taxes D) decrease interest rates

---

Ques. 2

An increase in the price level in the United States will have what effect on the aggregate expenditure line?
 
  A) Aggregate expenditure will shift upward.
  B) Aggregate expenditure will become steeper.
  C) Aggregate expenditure will shift downward.
  D) Aggregate expenditure will not be affected by an increase in the price level in the United States.

---

Ques. 3

What impact does an increase in the price level in the United States have on net exports and why?
 
  A) An increase in the price level decreases net exports by increasing the relative cost of American goods.
  B) An increase in the price level increases net exports because higher prices decrease American spending on imports.
  C) An increase in the price level decreases net exports because higher prices decrease the value of the dollar.
  D) An increase in the price level increases net exports because higher prices lower the value of the dollar.

---

Ques. 4

Last year, the unemployment rate was 4 percent and the inflation rate was 3 percent. If the natural rate of unemployment is 3 percent, how do you expect inflation to change?
 
  What will be an ideal response?

---

Ques. 5

If the exchange rate changes from 1.45 = 1 euro to 1.37 = 1 euro, then
 
  A) both the euro and dollar have appreciated.
  B) the euro has appreciated and the dollar has depreciated.
  C) the euro has depreciated and the dollar has appreciated.
  D) both the euro and dollar have depreciated.

---

Ques. 6

If the Federal Open Market Committee wants to decrease the money supply through open market operations it will
 
  A) buy U.S. Treasury Securities. B) decrease the discount rate.
  C) sell U.S. Treasury Securities. D) increase the discount rate.

---

Ques. 7

Which of the following would be most likely to induce Congress and the president to conduct contractionary fiscal policy? A significant
 
  A) increase in labor productivity. B) decrease in oil prices.
  C) increase in inflation. D) decrease in real GDP.

---

Ques. 8

A decrease in the price level results in a(n) ________ in household consumption spending and a(n) ________ in investment spending.
 
  A) increase; increase B) decrease; increase C) increase; decrease D) decrease; decrease