Version A

Name: $q,$ Class: $q,$ Date: $q,$

You are allowed to use a calculator $($not on your phone or computer$)$ and two $4"$x$6"$ notecard written on front and back. You have $120$ minutes to finish the exam

You must write your version letter on the "Test" line of your scantron.

Select the best answer choice for each question. Answers must be marked on the bubble sheet using a #$2$ pencil. Failure to use a #$2$ pencil will result in a score of $0.$ Each question is worth $2\mathrm{.}5$ points.

Use the following prompt for questions $1-3.$ A stock market crash significantly reduces real wealth. The government undertakes fiscal policy in an attempt to stabilize the economy.

The government will want to run fiscal policy, which will require deficits to $q,$ in order for the policy to be successful.

a$.$ Expansionary; Increase

b$.$ Expansionary; Decrease

c$.$ Contractionary; Increase

d$.$ Contractionary; Decrease

e$.$ Countercyclical; Decrease

Assuming the policy is successful, what will be the effect on output, unemployment, and the price level? Make your comparisons to the equilibrium reached after the stock market crash.

a$.$ Output Increases; Unemployment Increases; Price Level Increases

b$.$ Output Decreases; Unemployment Increases; Price Level Increases

c$.$ Output Increases; Unemployment Decreases; Price Level Decreases

d$.$ Output Increases; Unemployment Decreases; Price Level Increases

e$.$ Output Increases; Unemployment Increases; Price Level Decreases

If the government's demand side fiscal policy response is too strong and it moves past the pre$-$crash equilibrium, what will happen in the long run to output, unemployment, and the price level? Make your comparisons to the equilibrium before the stock market crash.

a$.$ Output Increases; Unemployment Decreases; Price Level Decreases

b$.$ Output Increases; Unemployment Decreases; Price Level is Unchanged

c$.$ Output is Unchanged; Unemployment is Unchanged; Price Level Decreases

d$.$ Output is Unchanged; Unemployment is Unchanged; Price Level Increases

e$.$ Output Increases; Unemployment Decreases; Price Level Increases