SOLVED

11) The natural rate of interest is a __________ rate that __________ inflationary expectations. A) nominal; includes B) nominal; excludes C) real; includes D) real; excludes 12) When the economy is at full employment __________ interest rates are __________ by an expansionary monetary policy if inflationary expectations are generated. A) real; decreased B) real; not changed C) nominal; decreased D) nominal; not changed 13) When the economy is at full employment __________ interest rates are __________ by an expansionary monetary policy if inflationary expectations are generated. A) real; decreased B) real; increased C) nominal; decreased D) nominal; increased 14) Starting from full employment output, fiscal policy will be completely crowded out in real terms, even with __________ LM curve, so long as prices are __________. A) a vertical; flexible B) a vertical; fixed C) an upward-sloping; flexible D) an upward-sloping; fixed 15) Suppose that IS and LM intersect at full-employment output. A rightward shift of IS will be followed by a __________ price level that shifts LM to the __________ in a return to full-employment. A) rising; right B) rising; left C) falling; right D) falling; left 16) Suppose that IS and LM intersect at full-employment output. A leftward shift of IS will be followed by a __________ price level that shifts LM to the __________ in a return to full employment. A) rising; right B) rising; left C) falling; right D) falling; left 17) Suppose that IS and LM intersect at full-employment output. A rightward shift of LM will be followed by a __________ price level that shifts LM to the __________ in a return to full employment. A) rising; right B) rising; left C) falling; right D) falling; left 18) Suppose that IS and LM intersect at full-employment output. A leftward shift of LM will be followed by a __________ price level that shifts LM to the __________ in a return to full employment. A) rising; right B) rising; left C) falling; right D) falling; left 19) “A rise in the money supply raised output in the short run, but left output unaffected in the long run.” This statement implies that the price level __________ in the long run, causing the interest rate to __________. A) rose; rise B) rose; fall C) fell; rise D) fell; fall 20) “A drop in the money supply lowered output in the short run, but left output unaffected in the long run.” This statement implies that the price level __________ in the long run, causing the interest rate to __________. A) rose; rise B) rose; fall C) fell; rise D) fell; fall 21) “A rise in government expenditures raised output in the short run, but left output unaffected in the long run.” This statement implies that the price level __________ in the long run, causing the interest rate to __________. A) rose; rise B) rose; fall C) fell; rise D) fell; fall 22) “A drop in government expenditures lowered output in the short run, but left output unaffected in the long run.” This statement implies that the price level __________ in the long run, causing the interest rate to __________. A) rose; rise B) rose; fall C) fell; rise D) fell; fall