Which of the following statements is correct?
I. If other factors are held constant, the level of employment in the economy determines real Gross Domestic Product (GDP).
II. According to classical economists, only voluntary unemployment exists in the long run.
A) I only
B) II only
C) Both I and II
D) Neither I nor II
C
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Based on the figure below. Starting from long-run equilibrium at point C, an increase in government spending that increases aggregate demand from AD to AD1 will lead to a short-run equilibrium at point ________ creating _____gap. 
A. D; an expansionary B. B; no output C. B; expansionary D. A; a recessionary
When the Fed increases the money supply
A) the interest rate rises and this stimulates consumption spending. B) the interest rate falls and this stimulates investment spending. C) the interest rate rises and this stimulates investment spending. D) people spend less because they have more money.
Which of the following is NOT a contractual savings institution?
A) a life insurance company B) a pension fund C) a savings and loan association D) a fire and casualty insurance company
If the Fed reduces the interest paid on banks' reserves, it is trying to make banks hold:
A. More excess reserves B. Less excess reserves C. More required reserves D. Less required reserves