## [answered] 10) Assume that the economy is initially operating at the n

10) Assume that the economy is initially operating at the natural level of output. Suppose there is an increase in the price of oil. If there is no shift in the aggregate demand curve then this will cause which of the following in the medium run? A) a reduction in the interest rate. B) a reduction in output and an increase in the price level. C) a reduction in output and a reduction in the interest rate. D) a reduction in unemployment, an increase nominal wages and an increase in the price level. E) a reduction in the price level and no change in output. 11) The ?sacri?ce ratio? is the needed to achieve a decrease in in?ation of one percentage point. A) number of years B) percentage-point decrease in money growth C) permanent increase in the unemployment rate D) number of point years of excess unemployment E) debt to GDP ratio 12) According to the IS-LM model of Ch. 14, a decrease in expected in?ation leads in the short run to A) a decrease in output (Y) and an increase in the nominal interest rate (i). B) a decrease in Y and a decrease in i. C) an increase in Y and an increase in i. D) an increase in Y and a decrease in i. E) an uncertain impact on Y and no change in i. 13) In the medium run higher money growth gIn causes A) lower nominal interest rates and lower real interest rates B) lower nominal interest rates and no change in real interest rates C) no change in nominal interest rates and no change in real interest rates D) higher nominal interest rates and no change in real interest rates E) higher nominal interest rates and higher real interest rates 14) Starting from medium run equilibrium, suppose there is a decrease in money growth gm. The impact on the nominal interest rate i is: A) i falls in the short run but is unchanged in the medium run. B) i falls in the short run but increases in the medium run. C) i increases in both the short run and the medium run. D) i increases in the short run but is unchanged in the medium run. E) i increases in the short run and falls in the medium run. 15) A liquidity trap makes it dif?cult for policymakers to increase economic activity because: A) an open market operation will have no effect on money supply. B) increased money supply will increase nominal interest rates. C) ?scal policy will have no effect on the demand for goods. D) expansionary ?scal policy will increase real interest rates. E) none of the above.
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