1.

a) The assumption that the aggregate production function exhibits decreasing returns to capital (K) implies that a 5% increase inKwill cause:

Select one:

a. a reduction inY/N.

b. Yto increase by exactly 5%.

c. a reduction inK/N.

d. no change inY/N.

e. Yto increase by less than 5%.

b)Which of the following statements will likely be correct when inflation has not been very persistent?

Select one:

a. lower unemployment rates will be associated with higher inflation rates

b. the current inflation rate will not depend heavily on past inflation

c. expected price level for a given year will equal the previous year's actual price level

d. All of the above.

e. None of the above.

c)Among the reasons that the poor countries have been unable to close the "technology gap" with the rich countries is:

Select one:

a. poorly developed financial markets.

b. poorly established property rights.

c. low education levels.

d. All of the above.

e. None of the above.

d) In which of the following situations would output growth be zero?

Select one:

a. 2% nominal money growth and 0% inflation

b. 4% nominal money growth and 0% inflation

c. 0% nominal money growth and 3% inflation

d. -1% nominal money growth and 0% inflation

e. None of the above.

e)

The Phillips curve relation is represented as: Select one: 0 b. U- Up 1= - B( gy - 3%). O C. Opt -9m- O d. None of the above