3. The IS curve is $Y = 20 - 1.5r$, and the aggregate demand curve is $Y = 15.5 - 0.3\pi$. When the inflation rate is 3 percent, output is _________.
(A) 20
(B) 14.6
(C) 9.5
(D) 3.6
E) none of the above

4. Factors that shift the AD Curve include _________. (A) government purchases (B) autonomous investment (C) taxes (D) all of the above E) none of the above

5. Using the Table 1, the unemployment rate is (A) 11.2 percent. (B) 6.3 percent. (C) 4.2 percent. (D) 10 percent. E) 5.8 percent.

1. On the Figure 1, the wage level at point _______ might represent an efficiency wage. (A) 2 (B) 4 (C) 6 (D) 5

2. On the Figure 1, suppose the labor market is in equilibrium at point 2, then the demand curve shifts down to the position shown on the graph. If the real wage has not changed, then the horizontal distance between points _______ measures the unemployment that results. (A) 2 & 4 (B) 2 & 1 (C) 3 & 4 (D) 6 & 4

3. Referring to the Figure 1, assume that, at first, the labor market is in equilibrium at point 4. In which scenario does unemployment rise, with no change in the quantity of employment? (A) real wage rises to the level of points 1 and 2 (B) supply shifts to pass through point 5, with no change in the real wage (C) demand shifts to pass through point 3, with no change in the real wage (D) supply shifts to pass through point 3, with no change in the real wage

4. Referring to the Figure 1, assume that, at first, the labor market is in equilibrium at point 4. Then, demand shifts to pass through point 3, and the real wage adjusts to the new equilibrium. _______ is _______ at the new equilibrium, compared to the original equilibrium. (A) unemployment; larger (B) unemployment; smaller (C) the labor force; smaller (D) employment; larger

5. On the Figure 2, movement from point to point might occur if there is a negative demand shock, followed by updating of expected inflation. (A) F; G (B) H; I (C) H; F (D) F; H E) none of the above

6. On the Figure 2, suppose point G is on the short-run aggregate supply curve π = 2.5 + 2*(Y - 22) and aggregate demand curve Y = 29.25 - 0.5π. If output at point G is 25, and inflation expectations are adaptive, then the inflation rate next period will be (A) 11.5 (B) 14.5 (C) 8.5 (D) 2.5 E) none of the above

7. In the Figure 3, assume that output is $10.5 trillion, while potential output is $12 trillion. If there is no policy intervention, we should expect _________. (A) rightward shifts of IS & AD, so that both output and inflation rise (B) a decrease in inflation to shift the MP curve, raising the real interest rate (C) declines in both the inflation rate and the real interest rate as output rises (D) a decrease in inflation to shift the AD curve, causing output to rise E) none of the above

8. In the Figure 3, assume that output is $10.5 trillion, while potential output is $12 trillion. If a fiscal stimulus package is implemented quickly, raising output to $12 trillion, while inflation remains constant at one percent, then the figure implies that the real interest rate will be _________ percent. (A) 1.5 (B) 0 (C) 1 (D) 0.5 E) 2.5

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