1. The AD-AS model depicts a self-correcting economy. In the long run, the price level ______ to eliminate _____ and _____ to eliminate a(n)_____ without help from government policies.

A. falls, recession: rises, expansion
B. rises, recession: falls, expansion
C.remains the same: expansion; remains the same, recession
D. falls, expansion; falls, recession
E. rises, expainsion; rises, recession

2. If inflation does not adjust rapidly, then when the Bank of Canada decreases the nominal interest rate, the real interest rate will ____.
A) increase
be determined by saving and investment decisions.
C) not change
D) equal the nominal interest rate
E) decrease

3.Which of the following would be included in the calculation of GDP for 2012?

A.The price of a home built in 1991 and sold in 2012
B. the price of 100 shares of Exxon stock purshased in 2012
C. The price of a classic 1960 Thunderbird purchased 10 2012
D. The price of a new assembly line built and purchased in 2012 to replace a worn-out machine.
E. The price of a used bicycle purchased at a garage sale in 2012

4. Which of the following is not a reason why, in practice, monetary policty-making is much more complex than the theory would suggest?
A. the central bank's knowledge of how the real world works is imperfect.
B. the central bank's knowledge of the output gap is imprecise.
c.the central bank's knowledge of the timing of a monetary policy action on the economy is imperfect
D.the central bank's knowledge of the magnitude of the effect of a given interest rate change on aggregate demand is imprecise.
E. the central bank's ability to change the overnight rate is limited.

This post was edited by yashar on Apr 19 2013 01:08pm