In an AD-AS diagram with an upward-sloping AS-curve, if a tax decrease is combined with money expansion,
A. output will remain relatively unaffected but interest rates will decrease
B. output will remain relatively unaffected but interest rates will definitely increase
C. aggregate demand, the price level, and output will all decrease
D. aggregate demand, the price level, and output will all increase
E. the price level will increase but we can't say what will happen to output or interest rates
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If government purchases and taxes are both increased by the same lump sum, we can expect the following in the medium run:
A. output, prices, and interest rates will all remain unchanged
B. output, prices, and interest rates will all decrease
C. output, prices, and interest rates will all increase
D. output and prices will remain the same but interest rates will increase
E. output and prices will increase but interest rates will remain the same
In an AD-AS diagram with an upward-sloping AS-curve, an increase in money supply will
A. increase output and the price level but not affect the interest rate
B. increase output, the price level, and the interest rate
C. increase output and the price level but lower the interest rate
D. decrease the interest rate, increase the price level, but leave output unchanged
E. increase the price level but leave output and the interest rate unchanged
When nominal money supply is held constant and the price level increases, then
A. real money balances increase and real interest rates decrease
B. real money balances decrease and real interest rates increase
C. real money balances decrease and real interest rates remain the same
D. the AS-curve must have shifted to the right
E. both B) and D)
In the medium run, if government purchases are decreased and nominal money supply is increased, then we can expect that
A. aggregate demand will decrease and aggregate supply will increase, leaving the level of output the same
B. output, prices, and interest rates will all increase
C. output and prices will decrease, while interest rates will increase
D. interest rates will decrease, while output and prices may increase, decrease, or remain the same
E. none of the above
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