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1. Which of t he following stalemenls is true? (A) The larger a nation's marginal propensity to consume, Ihe smaller the open-economy nmltiplier. (B)The smaller a nation's marginal propensity lo imporl, the smaller the open-economy multiplier. (C)The larger a nation's marginal propensity to export, the smaller Ihe open-economy mulliplier. (D)The larger a nation's marginal propensity lo import, Ihe smaller the open-economy nuilliplier.

2. If inveslinenl is perfectly inelaslic lo intcresl rate changes, then (A) monelary policy is most effective. (B) fiscal policy is ineffective. (C) fiscal policy will be less effective since lliere's a crowding-out effect. (D) fiscal policy is most powerful.

3. If inflationary expectations increase, Ihe Phillips curve will (A) become vertical. (B) shift to Ihe right, (C) shift lo llie left. (D) become upward sloping.

4. If the economy is operaling close lo capacity, an increase in aggregate demand causes a__________change in the price level and______ change in ouipui. (A) small; big (B) small; small (C) big; small (D) big; big

5. Which of ihe following would cause the shorl run aggregate supply curve lo shift to the right? (A) An increase in taxes (B) Higher energy prices (C) Increases in government regulation (D) Retired workers reentering Ihe labor force

6. An economy is not able to develop because of a lack of capital. Which of [lie following strategies would you suggest this economy pursue? (A) Increase the political stability of ilie economy. (B) Lower interest rates. (C) Impose quotas on liow much capital can be imported from other countries lo reduce dependency on foreign capital. (D) Nalionalize private enterprises because (he government sector is not motivated by profit maximization.

7. If tlie interest rate is so high that it is affecting economic growth, the recommencled policy action should be (A) an expansionary fiscal policy. (B) an expansionary monetary policy. (C) a contractionary monetary policy. (D) the (lemaiul for money should be increased.

8. If no foreign companies produce in a country, but many of the country's companies produce abroad, (hen it is safe lo say that (A) Ihe country's GNP exceeds its GOP. (B) the counLry's GDP exceeds its GNP. (C) the country's GNP and GDP are equal. (D) the coimtry's GDP equals its domestic income.

9. If Sara's total consumption is ${,500 a month, the fraction of her income that she consumes is 60%, and her income is $2,000, the amount of money she consumes when her income is zero is (A) $200. (B) S300. (C) $500. (D) $1200.

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