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The newspaper announced that the nation’s output decreased. This
implies that:

sales of existing houses probably increased.
nominal GDP rose proportionately the same as prices.
nominal GDP rose proportionately more than prices.
nominal GDP rose proportionately less than prices.

The FED’s preferred measure of inflation is:

The headline Consumer Price Index (CPI)
The headline Producer Price Index (PPI)
The Core GDP Deflator
the Core Personal Consumption Expenditure Index (PCEI)

If monetary policy aims to cool down the economy, it would:

decrease the interest rate for discount loans
lower the income taxe rate
increase the corporate taxe rate
sell Treasury Securities

If fiscal policy aims to stimulate the economy, it would

buy Treasury Securities
decrease the interest ratefor discount loans
increase the budget deficit
introduce a tax on exports

If the government wants to increase potential output, it

allow less immigration
reduce the marginal corporate tax rate
answers a) and b) are correct
all of the above

Which of the following would NOT be a supply-side policy

an increase in the marginal income tax
introducing more generous rules for capital depreciation
lowering the fed funds target rate
only answers a) and c)

If the FED sells Treasury Securities, the monetary base

stay the same

Everything constant, an increase of the budget deficit

stimulate the economy
lower the GDP growth rate
increase the money supply
only answers a) and c)

When the prices of imported food stuffs increase,

headline CPI inflation will be higher than core CPI
headline CPI inflation will be lower than core CPI
inflation measured by the PCE price deflator will be higher
than inflation measured by the implicit GDP deflator.
A and C.

High and unstable inflation rates have negative macroeconomic
consequences, because

they lead to high nominal interest rates.
businesses spend too many ressources on adjusting price
investors invest too many resources in inflation-proof
all of the above.

A government’s debt is considered sustainable, if:

its future tax revenues can be reasonably expected to cover its
interest expenditures and debt repayment
its future tax revenues cannot be expected to cover its
interest expenditures and debt repayment
future governments must achieve budget surpluses to reduce the
Only A and C

A negative feature of aggregate demand policy is that it can

no changes in the price level in the short run.
big changes in output in the short run.
instability in the economy.
no changes in the long run.

If US personal consumption, total investment and government
expenditures remain the same and US imports fall, the US economy
has produced:

the same amount of goods and services
more goods and services
less goods and services

When productivity rises while cost remains the same,

the price level falls and aggregate supply rises.
the price level rises and aggregate supply rises.
the price level falls and aggregate supply falls.
the price level rises and aggregate supply falls.

The aggregate supply curve says that an increase in the nation’s
price level causes aggregate supply to:

shift to the left
shift to the right

Which of the following policies would be most appropriate in
times of rising inflation?

wage and price controls.
a reduction in the federal funds rate.
open market sales by the Fed.
open market purchases by the Fed.

Which of the following is NOT an adequate aggregate supply
policy to increase real GDP?

deregulation of business.
a reduction in the Fed’s discount rate.
increasing subsidies for R&D.
Improving the public school system for better training of
future workers.

Given historical experience, the most important souce of
economic growth in the long run is

fixed capital formation.
technological progress.
education and training of the work force.

A fiscal expansion can be used to overcome a short-run
deficiency of aggregate demand but may risk:

an increase in inflation
a slowdown in long-run economic growth
causing interest rates that are too high
All of the above