32. The Central Bank lowers interest rates. As a result, in the short run, real GDP ________ and the price level ________.
(A) increases; rises
(B) increases; falls
(C)decreases; rises
(D) decreases; falls

33. Suppose that the economy begins at a long-run equilibrium. Which of the following raises the price level and decrease real GDP in the short run?(A) a decrease in the quantity of money(B) an increase in the price of oil that decreases aggregate supply(C)an increase in the stock of capital that increases aggregate supply(D) an increase in government expenditures

34. A monetarist economist believes that(A) if the economy was left alone, it would rarely operate at full employment.(B) the economy is self-regulating and always at full employment.(C)the economy is self-regulating and will normally, though not always, operate at full employment if monetary policy is not erratic.(D) the economy is self-regulating and will normally, though not always, operate at full employment if fiscal policy is not erratic.

35. Suppose that the slope of the AE curve is 0.80. If prices remain constant and government expenditures increase by $10 billion, what will be the change in real GDP?(A) $8 billion (B) $2 billion(C)$10 billion (D) $50 billion

36. Which of the following could start a demand-pull inflation?(A) an increase in government expenditures(B) an increase in imports(C)a decrease in the quantity of money(D) an increase in the money prices of raw materials

37. If both the unemployment rate and the inflation rate decrease, you predict that ________.(A) the expected inflation rate has increased(B) the natural unemployment rate has decreased(C)the economy has moved along its short-run Phillips curve(D) the natural unemployment rate has increased

38. Which of the following is considered a purpose of the federal budget?I. To help the economy achieve full employment.II. To finance the activities of the federal government.III. To promote sustained economic growth.(A) I and II (B) I and III(C)II and III (D) I, II and III

39. "European Economic Recovery Plan""The European Commission urged EU governments to jointly combat the economic slowdown with 200 billion euros ($256 billion) in spending and tax cuts to boost growth and consumer and business confidence. " The plan "...would see the 27 EU governments spend 1.5 percent of the bloc's gross domestic product to halt the slowdown that has already pushed some European nations into recession."www.iht.com, 11/26/2008The plan is expected to(A) shift the AD curve rightward and increase real GDP.(B) shift the AD curve leftward and decrease the recessionary gap.(C)decrease the recessionary gap and decrease the price level.(D) use the autonomous tax multiplier to eliminate the inflationary gap.

40. In an effort to address the troubled economy, ..."For the ninth time in just over a year, the Federal Reserve is expected to cut interest rates, quite possibly its last reduction in this downturn." Rates have not been this low "... since 2003, when the economy was growing at a snail's pace. " www.csmonitor.com, 10/28/2008The Fed's rate cuts will ________ bank reserves and ________.(A) increase; increase the money supply and real GDP(B) decrease; decrease the money supply and real GDP(C)increase; increase the exchange rate and real GDP(D) decrease bank reserves; decrease the exchange rate and real GDP

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