1) The classical model

a. is another name for the short-run macro model

b. is believed by most economists to be a better explanatory model for short-term, rather than long-term, economic performance

c. is an attempt to explain why the economy tends to perform rather well over long periods of time

d. was developed to explain the long period of poor economic performance during the Great Depression

e. was not really accepted as a legitimate economic theory until the 1950s

2) What is the difference between nominal and real GDP?

a. Real GDP is adjusted for depreciation; nominal GDP is not.

b. Real GDP is adjusted for taxes and transfer payments; nominal GDP is not.

c. Real GDP is adjusted for changes in the price level; nominal GDP is not.

d. Nominal GDP is adjusted for changes in the price level; real GDP is not.

e. Nominal GDP is adjusted for depreciation; real GDP is not.

3) If equilibrium GDP is below potential, then

a. the Central Bank will lower the money supply

b. unemployment is unusually low

c. the wage rate will fall as workers compete for scarce jobs

d. the wage rate will remain stable as labor productivity increases

e. the aggregate supply curve will shift leftward