Question #1: A country saves ¼ of any increase in disposable income. Then government purchases, G, decrease by 100. In what direction and by how much will the AD curve shift?
A) +400, right
B) -400, left
C) +25, right
D) -25, left
Question #2: (Select one or many) Which of the following will shift the Aggregate Demand (AD) curve to the right?
A) The Fed lowers interest rates
B) Taxes increase
C) Government purchases increase
D) Technology increases
Question #3: (Select one or many) An economy has potential output of 120 and actual output of 140. What is true?
A) A recessionary gap exists
B) An inflationary gap exists
C) U > Un
D) U < Un
Question #4: Which of the following are consistent with the Natural Rate Hypothesis?
A) Y always ends up equaling Yp in the long run
B) Actual U cannot be kept lower than Un indefinitely because U always returns to Un
C) If the government shifts AD to the right when initially Y = Yp, then temporarily U>Un
D) All of the above are consistent with the hypothesis
E) Only a and b are consistent with the hypothesis