1. An open market sale will result in a(n)

decrease in nominal interest rates.

decrease in aggregate supply.

decrease in real interest rates.

increase in aggregate demand.

increase in real and nominal interest rates.

2. If Congress decides to increase defense spending but does not increase taxes to cover the deficit spending, we can expect that

GDP will decrease.

consumer spending will decrease.

the money supply will increase.

interest rates will increase.

consumer spending will increase.

3. If in response to a spreading recession, the President calls for an increase in investment spending by businesses, which of the following would be the best policy mix to accomplish this goal without increasing the output level?

Buy bonds and increase government spending

Buy bonds and decrease government spending

Sell bonds and increase business taxes

Sell bonds and decrease government spending

Sell bonds and increase government spending

4. Stagflation can be caused by a decrease in

investment spending.

consumer spending.

government regulations.

productivity.

interest rates.

5. A change in the long-run Phillips Curve will occur when

aggregate demand shifts right.

aggregate demand shifts left.

aggregate supply shifts right.

aggregate supply shifts left.

the natural rate of unemployment changes.