1. Referring to the figure US Macroeconomic Equilibrium : Moving from Point C to

Question

1. Referring to the figure US Macroeconomic Equilibrium: Moving from Point C to Point B can be caused by which of the following policies?

A. The Federal Open Market Committee (FOMC) conducts an open market purchase

B. The Congress approves a tax cut

C. The congress increases taxes and urge the government to increase purchases

D. Fed lowers the discount rate

E. The Fed lowers the reserve requirements

F. All of the above are possible

G. Some of the above are possible

H. None of the above is possible

2.(Referring to the figure US Macroeconomic Equilibrium: Moving from Point C to Point D can be caused by which of the following policies?

A. The government is adopting a contractionary monetary policy

B. The government is adopting an expansionary monetary policy

C. The congress cuts taxes and urge the government to increase purchases

D. The president increases federal purchases

E. The Fed is adopting the right fiscal policy

F. All of the above are possible

G. Some of the above are possible

H. None of the above is possible

3. Referring to the figure US Macroeconomic Equilibrium: The order of equilibrium points B A D can be explained by which of the following:

A. A contractionary fiscal policy that is used in order to resolve an inflationary gap, that was created by the Fed

B. An expansionary fiscal policy that is used in order to resolve an inflationary gap, that was created by the Fed

C. An expansionary fiscal policy that is used in order to resolve an inflationary gap, that was created by a negative supply shock

D. A contractionary fiscal policy that is used in order to resolve a recessionary gap, that was created by the Fed

E. An expansionary fiscal policy that is used in order to resolve a recessionary gap, that was created by the Fed

F. All of the above are possible

G. Some of the above are possible

H. None of the above is possible

4. Referring to the figure US Macroeconomic Equilibrium: Which of the following order of equilibrium points best represent how a contractionary fiscal policy is used in order to resolve an inflationary gap that was created by the Fed:

A. B A D

B. D A D

C. B C B

D. C D A

E. D C D

F. All of the above are possible

G. Some of the above are possible

H. None of the above is possible

5. Referring to the figure US Macroeconomic Equilibrium: Which of the following order of equilibrium points best represent how a contractionary fiscal policy is used in order to resolve an undesired supply shock:

A. B A D

B. D A D

C. B C B

D. C D A

E. D C D

F. All of the above are possible

G. Some of the above are possible

H. None of the above is possible

6. Referring to the figure US Macroeconomic Equilibrium: Which of the following order of equilibrium points best represent how a contractionary fiscal policy is used in order to resolve a recessionary gap that was created by the Fed:

A. B A D

B. D A D

C. B C B

D. C D A

E. D C D

F. All of the above are possible

G. Some of the above are possible

H. None of the above is possible

Explanation / Answer

1) THe answer is H-) none of the above is possible.

because, all these options increase or decrease the aggregate demand in the economy, but moving from point C to B is caused by decrease in aggregate supply.

2) The answer is A -) The government is adopting a contractionary monetary policy

becasue , in contractionary monetary policy, money supply has beed decreased and due to which aggregate demand also decreased.

3) The answewr is A -) A contractionary fiscal policy that is used in order to resolve an inflationary gap, that was created by the Fed.

4) The answer is A -) B A D

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