QUESTION 1 A company in the US invests in developing new computer software. How will this affect the US GDP? O a. increase O b. decrease O c. no effect QUESTION 2 Consider the following events and decide what their direct effect on GDP is. (1) A couple buys two tickets for the show "O" in Las Vegas. (2) A family buys long-term bonds to save for the future. (3) Dave sells his old motorbike to his neighbor. O a. Events (1) and (2) increase GDP, but (3) does not. b. Event (1) increases GDP, but (2) and (3) do not. O c. Event (2) increases GDP, but (1) and (3) do not. QUESTION 3 Consider the following two statements: (1) The main reason people demand and hold money (instead of, e.g.. bonds) is that it earns interest payments. (2) The Fed uses the monetary policy tool of open market operations to affect interest rates. a. Both statements are correct. O b. Both statements are inc O c. Statement (1) is correct but (2) is not. O d. Statement (2) is correct but (1) is not. QUESTION 4 According to the AS-AD model, which of the following statements is true? a. The "potential output" can be directly influenced by monetary policy- O b. An increase in the supply of money reduces aggregate demand (AD curve). O c. The invention of new technologies that increase productivity reduces an economy's "potential output". O d. An increase in consumer confidence tends to lead to an increase in GDP and an increase in the price level. QUESTION 5 The Laffer curve says that an increase in income taxes can raise or lower tax revenue. depending on how labor supply responds to the change in the tax rate. a. True O b. Wrong QUESTION 6 The elasticity of labor supply - i.e., the percent change of labor supplied due to a percent change in wages - tends to be: O a. Between -1 and 0. O b. Between 0 and 1. c. Between 1 and 5