Name: ___________________________ Class: _________________ Date: __________
1. Answer the following questions using an aggregate demand–aggregate supply
a. Represent an economy at long-run equilibrium.
b. Show what happens when aggregate demand increases.
c. Is this economy in an expansion or recession now?
d. What type of fiscal policy would you suggest be taken by Congress?
e. What will this policy do to your aggregate demand–aggregate supply model?
2. Which of the following graphs illustrates what happens when the government enters
the loanable funds market to borrow?
3. Which of the following diagrams shows what supply-side fiscal policy initiatives try to
do to the long-run aggregate supply curve?
4. At ________ tax rates, ________ in those tax rates lead to ________ in total tax
high; increases; increases
low; increases; decreases
low; decreases; increases
low; decreases; decreases
high; decreases; decreases
5. The Federal Reserve generally uses ________ to implement monetary policy.
federal tax policy
the reserve requirement ratio
the discount rate
open market operations
6. Central banks can use monetary policy to
reduce interest rates.
increase long-run productivity.
increase government spending.
balance government budgets.