12. Take a graph with the unemployment rate on the horizontal axis and the infation rate on the vertical axis. Which of the following will shift the Phillips curve towards the northeast?
(A) A positive aggregate demand shock
(B) Contractionary monetary policy
(C) A negative aggregate supply shock
(D) A decrease in expected inflation

8. In a competitive market, a firm's supply curve dictates the amount it will supply. In a monopoly market (A) the same is true. (B) the decision about how much to supply is impossible to separate from the demand curve it faces. (C) the supply curve conceptually makes sense, but in practice is never used. (D) the supply curve will have limited predictive capacity.

9. Equilibrium quantity in markets characterized by oligopoly are (A) lower than in monopoly markets and higher than in perfectly competitive markets. (B) lower than in monopoly markets and lower than in perfectly competitive markets. (C) higher than in monopoly markets and higher than in perfectly competitive markets. (D) higher than in monopoly markets and lower than in perfectly competitive markets.

10. In the long run, a proft-maximizing firm in a monopolistically competitive market operates at(A) efficient scale. (B) the point where demand equals marginal cost. (C) the point where revenue is also maximized. (D) some point along the downward sloping portion of its average total cost curve.

11. Which of the following statements is correct if a country has adopted fixed exchange rate regime? (A) If the currency is overvalued with respect to the fixed parity, the central bank has to intervene e.g. by increasing the interest rate. (B) The central bank has to offiset the effects of capital outfow on the exchange rate e.g. by buying domestic currency and paying with foreign reserves. (C) If, in order to reduce excess supply of the domestic currency, the central bank buys domestic currency at the target exchange rate, this will necessarily cause infation in the home country. (D) Measures taken by the central bank to keep the exchange rate fixed will not affect the domestic interest rate.

13. Which of the following statements is necessarily false； (A) Monetary policy can be conducted through open market operations, setting the minimum reserve requirement and through changing the refinancing rate at which banks can borrow money from the central bank. (B) In the short run, an increase in money supply causes a proportional increase in prices. Over time the latter decrease again. (C) Unemployment benefits are automatic stabilizers. (D) The positive effect of expansionary fiscal policy on production is reduced by crowding out.

14. According to the theory of sticky wages: (A) prices adjust slowly to a decrease in nominal wages. Firms face lower wages and since prices stay high they increase the level of produetion and thus employment. This results in higher aggregate supply. (B) wages adjust slowly to a decrease in prices. Firms face lower prices and since the costs of production stay high they have to decrease production and thus employment. This decreases aggregate supply. (C) not all frms immediately adjust their prices in reaction to a decrease in the price level. These firms face higher prices and thus they increase production, which increases aggregate supply. (D) prices react more than proportionally to increases in nominal wages. Producers face higher wages, but since prices increase more than wages they want to increase production. This results in higher aggregate supply.

15. According to the AS-AD model an increase of public investanent (A) might decrease GDP in the short run because of crowding out. (B) decreases prices in the short run which stimulates an economic recovery. (C) does not change long run aggregate supply. (D) increases aggregate supply which is depicted as a shift of the AS curve to the right.

16. Which of the following is the most important variable for judging an economy's long-run performance? (A) growth in nominal GDP (B) growth in real GDP (C) growth in real GDP per capita (D) growth in potential GDP

17. Assume that the currency-deposit ratio is 32%, the required reserve-deposit ratio is 7%, the excess reserve-deposit ratio is 1%, and total money supply is S1,320 billion. What is the amount of high-powered money? (A) $132 billion (B) $165 billion (C) $330 billion (D) $400 billion

18. When the central bank intervenes in the foreign exchange market by purchasing foreign cur- rency, it also routinely engages in open market sales of government securities. Why? (A) it has to sell securities to acquire the necessary funds (B) to avoid a recession that may be caused by the reduction in money supply resulting from the purchase of foreign currency (C) to prevent its intervention in the foreign exchange market from having a direct effect upon the domestic money supply (D) it wants to isolate the domestic economy from foreign competition