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1) The AD Curve ________. A) demonstrates how central banks respond to changes in interest rates by changing the inflation rate B) shows how changes in equilibrium output affect the inflation rate C) explains long run fluctuations in output and inflation D) all of the above E) none of the above 2) The MP Curve ________. A) demonstrates how central banks respond to changes in inflation with changes in the interest rate B) shows how changes in interest rates affect equilibrium output C) explains short run fluctuations in output and inflation D) all of the above E) none of the above 3) The IS Curve ________. A) demonstrates how central banks respond to changes in inflation with changes in the interest rate B) shows how changes in interest rates affect equilibrium output C) explains short run fluctuations in output and inflation D) all of the above E) none of the above 4) The AD Curve ________. A) indicates the level of aggregate output corresponding to different goods-market-clearing levels of the interest rate B) is downward sloping, because with higher inflation comes higher interest rates and lower spending, so equilibrium aggregate output declines C) explains how inflation affects output in the short run D) all of the above E) none of the above 5) The AD Curve ________. A) indicates the level of aggregate output corresponding to different goods-market-clearing levels of the inflation rate B) is downward sloping, because with higher inflation comes lower interest rates and lower spending, so equilibrium aggregate output declines C) explains how inflation affects output in the short run D) all of the above E) none of the above 6) Factors that shift the AD Curve include ________. A) the inflation rate B) aggregate output C) taxes D) all of the above E) none of the above 7) In the aggregate demand curve, the endogenous variable is ________. A) output B) inflation C) the real interest rate D) real money balances E) none of the above 8) An increase in the real interest rate occurs when ________. A) monetary policy responds automatically to an increase in inflation B) expected inflation increases, relative to the nominal interest rate C) an increase in autonomous spending causes an increase in equilibrium output D) all of the above E) none of the above 9) A decrease in the real interest rate occurs when ________. A) there is an autonomous tightening of monetary policy B) expected inflation increases, relative to the nominal interest rate C) a decrease in autonomous spending causes a decrease in equilibrium output D) all of the above E) none of the above 10) Factors that shift the AD Curve include ________. A) government purchases B) autonomous investment C) taxes D) all of the above E) none of the above

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