8. In the long run, larger budget deficits lead to ________.
(A) higher saving levels
(B) a fall in investment
(C) lower interest rates
(D) all of the above

4. In a country with unusually high tax rates, one might expect that ________. (A) GDP might be overstated because the government might avoid running surpluses (B) GDP might be understated because its citizens might avoid reporting some of their income (C) GDP might be overstated because the government might raise its outlays (D) GDP might be understated because its citizens might flee the country

5. Using the Cobb-Douglas production function, while holding other inputs constant, if the amount of a specific factor is increasing ________. (A) the increased amount of output from an extra unit of input declines (B) the increased amount of output from an extra unit of input increases (C) that factor's share of output is declining (D) that factor's share of output is increasing  

6. Based on the table 1 "Real and Nominal GDP," if year one is the base year, then the real GDP in year two, is ________. (A) 5000 (B) 5250 (C) 5900 (D) 6175

7. A technology shock could have a different impact than a natural catastrophe because ________. (A) the former would likely lower TFP and the latter raise labor productivity (B) the former would likely lower output and the latter raise production (C) the former would likely raise output and the latter would raise TFP (D) the former would likely raise TFP and the latter would curtail production

9. When the Fed buys government securities in the open market, the money supply ________ because ________. (A) decreases； banks lose liquidity, they make fewer loans and checking account deposits decrease (B) increases； banks gain liquidity, they make more loans and checking account deposits increase (C) increases； banks lose liquidity, they make more loans and checking account deposits increase (D) decreases； banks gain liquidity, they make fewer loans and checking account deposits decrease 

10. M1 does not include cash that is held in ATMs or bank vaults, because ________. (A) no one really owns that money (B) that money is included in M2 (C) that money earns no interest (D) the right to access that money is counted already as bank deposits

11. Rising inflation causes quantity demanded to decline, because ________. (A) the central bank raises the nominal interest rate by more than the increase in expected inflation (B) households and businesses are reluctant to spend when prices rise (C) higher inflation causes the IS curve to shift to the left (D) all of the above

12. The assumption that in the long run prices and wages are fully flexible implies that the long-run aggregate supply curve is determined by ________. (A) capital and labor inputs (B) technology (C) the natural rate of unemployment (D) all of the above

13. According to the "self-correcting mechanism" in the AD-AS framework, ________. (A) the aggregate demand curve shifts up or down as needed to bring the economy to full employment (B) the inflation rate changes as needed to move the economy along the short-run aggregate supply curve until output is at potential output (C) the long-run aggregate supply curve shifts until it intersects both the aggregate demand and short-run aggregate supply curves at a single point (D) none of the above

14. The "tech bubble" burst of 2000, the terrorist attacks of 2001 and the corporate scandals of 2001 and 2002 all had similar qualitative effects on the economy. Which of the following is an appropriate description of the mechanism that would have ensued? (A) Household and business spending would have been eroded shifting the AD curve to the left. (B) Unemployment would have risen and inflation would have fallen. (C) Output would have declined below potential but through shifts in the AS curve, the self-correcting mechanism of the AD-AS framework would have brought the unemployment rate down to the lower levels we saw by 2004. (D) all of the above