Module 14 Assignment: Problem Set — Policy Applications

You can click on the following link to download the problem set for this module: Policy Applications Problem Set.

Policy Applications Problem Set[1]

Use the following graph to answer questions 1 through 8 below:

Coordinate plane showing two lines: Curve 1 and Curve 2. Curve 1 runs parallel to the y axis and has an x intercept of (6, 0). Curve 2 has a y intercept of (0, 9) and an x intercept of (9, 0). There are 5 points plotted on the coordinate plane. Point A (4, 5), Point B (6, 3), Point C (8, 1), Point D (6, 6), and Point E (6, 2).

  1. What is Curve 1?
    1. short-run Phillips curve.
    2. long-run aggregate supply curve.
    3. short-run aggregate supply curve.
    4. long-run Phillips curve.

 

  1. What is Curve 2?
    1. short-run Phillips curve.
    2. long-run aggregate supply curve.
    3. short-run aggregate supply curve.
    4. long-run Phillips curve.

 

  1. What is the unemployment rate at point B?
    1. 0
    2. 6
    3. 4
    4. 8

 

  1. What is the inflation rate at point B?
    1. 3
    2. 0
    3. 5

 

  1. If the economy starts at B and the money supply growth rate increases, then in the short run the economy moves to
    1. C
    2. D
    3. A

 

  1. Suppose the economy starts at B and the money supply growth rate increases. As a result, in the short run the inflation rate will
    1. decrease.
    2. remain the same.
    3. increase.

 

  1. Suppose the economy starts at B and the money supply growth rate increases. As a result, in the short run, the unemployment rate will
    1. decrease.
    2. remain the same.
    3. increase.

 

  1. If the economy starts at B and the money supply growth rate increases, in the long run the economy
    1. moves to C.
    2. moves to D.
    3. stays at B.

 

Use the following graph to answer questions 9 through 11 below.

This graph shows the AD-AS diagram for Mexico:

Coordinate plane with AD, SRAS, and LRAS lines. The AD y intercept is (0, 1100) and the x intercept is (1100, 0). The SRAS y intercept is (0, 400). The LRAS line runs parallel to the y axis and the LRAS x intercept is (550, 0). The AD and SRAS curves intersect at (350, 750). The SRAS intersects the LRAS at (550, 950) and the AD intersects the LRAS at (550, 550).

  1. What type of the GDP gap is observed in Mexico?
    1. The economy is facing an inflationary gap.
    2. There is no recessionary or inflationary gap.
    3. The Economy is facing a recessionary gap.

 

  1. What type of fiscal policy should the government of Mexico be implementing to bring the economy to the long-run equilibrium?
    1. The government should implement contractionary fiscal policy.
    2. There is no need for either contractionary or expansionary fiscal policy.
    3. The government should implement expansionary fiscal policy.

 

  1. What type of fiscal policy should the government of Mexico implement to bring the economy to the long-run equilibrium?
    1. The FED should implement contractionary monetary policy.
    2. There is no need for either contractionary or expansionary monetary policy.
    3. The FED should be implementing expansionary monetary policy.

 

 

[1] This assignment by Lumen Learning is licensed under a Creative Commons Attribution 4.0 International License. You can access an alternative means to plotting points at https://www.desmos.com/calculator.