Refer to Figure 27-1. Suppose the economy is in short-run equilibrium above potential GDP and wages ...

Refer to Figure 27-1. Suppose the economy is in short-run equilibrium above potential GDP and wages and prices are rising.
 
  If contractionary policy is used to move the economy back to long run equilibrium, this would be depicted as a movement from ________ using the static AD-AS model in the figure above.
  A) B to A B) A to E C) C to B D) E to A E) D to C

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Ques. 2

Refer to Figure 23-3. Suppose that investment spending decreases by 5 million, decreasing aggregate expenditure and decreasing real GDP from GDP2 to GDP1. If the MPC is 0.8, then what is the change in GDP?
 
  A) -4 million B) -5 million C) -25 million D) -40 million

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Ques. 3

Suppose that at the beginning of a loan contract, the real interest rate is 4 and expected inflation is currently 6. If actual inflation turns out to be 7 over the loan contract period, then
 
  A) lenders gain 1 of the loan value. B) borrowers lose 3 of the loan value.
  C) lenders gain 3 of the loan value. D) borrowers gain 1 of the loan value.

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Ques. 4

List four types of government policies which can aid economic growth.
 
  What will be an ideal response?

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Ques. 5

Suppose there is a bank panic. Which of the following would not be a consequence of this bank panic?
 
  A) Bank total reserves would decrease.
  B) Bank checking account balances would decrease.
  C) Required reserves would increase.
  D) The economy would likely enter into a recession.
  E) Individual banks would have to shrink the value of loans they made.

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Ques. 6

Refer to Figure 28-6. If firms and workers have rational expectations, an expansionary monetary policy will cause the short-run equilibrium to move from
 
  A) point B to point A.
  B) point B to point C.
  C) point C to point A.
  D) point A to point B.
  E) point A to point C.