1. Discretionary fiscal actions available to the President,

2. Increased government spending on public works projects,

3. A change in the income tax rate,

4. Changes in net tax revenues that are the result of a change in the level of economic activity

5. A change in the unemployment insurance system

46. If the MPC = 0.8 and there is a $0.375 tax levied on each dollar of income, a $40 increase in government purchases will cause the budget surplus to

1. Increase by $10

2. Decrease by $10

3. Increase by $40

4. Decrease by $40

5. Increase by $30

47. If at full employment, the government wants to increase its spending by $100 billion without increasing inflation in the short run, it must do which of the following?

(A) Lower taxes by less than $100 billion.

(B) Lower taxes by $100 billion.

(C) Raise taxes by more than $100 billion.

(D) Raise taxes by $100 billion

(E) Raise taxes by less than $ 100 billion.

48. Crowding out is more likely to occur when

(A) The demand for money is interest sensitive, and private sector spending is largely interest insensitive.

(B) The demand for money is interest sensitive, and private sector spending is interest sensitive.

(C) The demand for money is interest insensitive, and private sector spending is interest insensitive.

(D) The demand for money is interest insensitive, and private sector spending is interest sensitive.

(E) The demand for money is interest insensitive, and private sector spending interest sensitivity does not matter

48. As interest rates rise, the opportunity cost of holding money _________ and the demand for money ________.

(A) Rises; rises

(B) Rises; falls

(C) Falls; rises

(D) Falls; falls

(E) Stays the same; falls

48. When the reserve ratio is 20% and individuals choose to reduce the amount of cash they hold in their pocket by 100 million dollars:

1. Due to the deposit multiplier, the public will become richer

2. The provision of loans will increase by 500 million dollars

3. The provision of deposits and loans will rise by 500 million dollars

4. The provision of loans will rise by 400 million dollars.

5. The provision of deposits and loans will rise by 400 million dollars

48. The instruments of monetary control are

1. The discount rate

2. The required reserve ratio

3. Open market transactions

4. Foreign exchange intervention

1. I, II, and III only

2. II, III, and IV only

3. I, II, and IV only

4. I, III, and IV only

5. I, II, III, and IV

48. If the Federal Reserve sells a significant amount of government securities in the open market, which of the following will occur?

1. The total amount of loans made by commercial banks will decrease

2. The total amount of loans made by commercial banks will increase

3. The money supply will increase

4. Rates of interest will decrease

5. Rates of interest and the total amount of loans made by banks will decrease.

48. When currency ratio is 5% and reserve ratio is 20%, a $100 increase in the monetary base will result in a maximum increase in the M1 money supply of

(A) $100, (B) $400, (C) $420, (D) $500, (E) $600.

48. The aggregate demand curve has a negative slope in part because when the price level increases

(A) The value of cash increases

(B) Imports become relatively more expensive

(C) The real quantity of money increases

(D) The interest rate increases

(E) Exports increase

48. According to sticky-wage model, when the price level is less than the expected price level, workers get a

1. Lower real wage than expected, and more workers are hired than expected.

2. Equilibrium wage rate

3. Lower real wage than expected, and fewer workers are hired than expected.

4. Higher real wage than expected and more workers are hired than expected.

5. Higher real wage than expected and fewer workers are hired than expected

56. What effect will an increase in the world supply of oil have on real GDP and the aggregate price level?

Gross Domestic Product Prices

1. Decrease Increase

2. Decrease Decrease

3. Increase Increase

4. Increase No change

5. Increase Decrease

56. Suppose that the total population of the country is 214.5 million, adult population is 188.1 million, total employment is 119.0 million, and 6.5 million are unemployed. Then the unemployment rate, as normally computed, is approximately:

1. 3 percent

2. 3.5 percent.

3. 4.5 percent.

4. 5.2 percent.

5. 5.5 percent.

56. When there is wait unemployment:

1. The real wage is rigid at a level below the market-clearing level.

2. The real wage is rigid at the market-clearing level.

3. The real wage is rigid at a level above the market clearing-level.

4. The real wage is flexible.

5. The price level is rigid.

56. Which of the following is an example of "adverse selection?"

(A) At a low wage, a worker quits to find a better job.

2. At a low wage, a worker sleeps when the boss is not looking because the worker is not

deeply concerned about being fired.

(C) At a low wage, only poorly qualified workers ever apply for this job.

(D) At a low wage, a worker cannot afford a healthy diet so he falls asleep at work due to a lack

of energy.

(E) At a low wage unions threaten a strike.

60. All of the following could reduce the unemployment rate except:

(A) A reduction in the number of people who are unemployed.

(B) An increase in the number of people who are employed.

(C) Equal reductions in employment and the number of people in the labor force.

(D) An increase in the number of people who have given up looking for work.

(E) An increase in the number of dishonest workers.