Omitted variables
A) can cause hypothesis tests to be unreliable.
B) require multiple regression analyses to find.
C) are usually those with t-statistics less than the critical value.
D) are usually outside the confidence interval.
A
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Use the following graph to answer the next question.
The size of the multiplier associated with changes in government spending in this economy is
A. 3.50. B. 5.00. C. 6.67. D. 2.00.
If the Fed wants to reduce bank reserves, it can:
A. Raise the discount rate or buy bonds on the open market. B. Reduce the minimum reserve ratio or sell bonds on the open market. C. Raise the discount rate or sell bonds on the open market. D. Decrease the minimum reserve ratio or reduce the discount rate.
Assume the MPC is 0.75, taxes increase by $100 billion, and government spending increases by $100 billion. Aggregate demand will
A. Increase by $100 billion. B. Decrease by $400 billion. C. Increase by $400 billion. D. Not change.
This graph reflects a Keynesian viewpoint. How would the economy respond to an aggregate demand decrease under the classical model?
a. The shift from AD1 to AD2 would also shift LRAS leftward to a new position at RGDP2.
b. The economy would quickly adjust to a new point of long-run equilibrium where AD2 intercepts LRAS.
c. The shift from AD1 to AD2 would produce a short-run equilibrium point at e2 that differs from E1.
d. The economy would quickly adjust to a new point of long-run equilibrium where AD1 intercepts LRAS.