1) Money is considered neutral in the long run because A) interest rates remain unchanged. B) the composition of output remains unchanged. C) price level remains unchanged. D) (A) and (B). E) All of the above. 2) If Japan continues to face a declining birth rate and an aging population while its citizens are becoming wealthier due to a rise in present value of lifetime resources, which of the following is true in the labor market? A) Real wages will fall and employment level will rise. B) Real wages will rise and employment level will fall. C) Real wages will fall and employment level will rise only if the effect of the change in population is larger than the effect of the change in wealth. D) Real wages will rise and employment level will fall only if the effect of the change in population is larger than the effect of the change in wealth. E) Real wages and employment level will change ambiguously. 3) Which of the following is true of crowding out? A) It does not occur when the economy is in a liquidity trap. B) Crowding out can be prevented by an expansionary monetary policy. C) It cannot occur when Keynesian expenditure multiplier is very large. D) (A) and (B). E) All of the above. 4) If investment is to changes in interest rate, the IS curve will be relatively in changing This implies that changes to monetary policies will be the output level. A) responsive; flat; ineffective B) not responsive; steep; effective C) responsive; flat; effective D) not responsive; flat; ineffective E) responsive; steep; ineffective
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