20. If the interest rate on savings increases, it is possible that
(A) Mary will decrease her savings in the work period.
(B) Mary will increase her savings in the work period.
(C) Mary will not change her consumption in the work period.
(D) All of the above are possible.

21. If the interest rate on savings increases, (A) Mary will decrease her savings in the work period if the income effect is greater than the substitution effect for her. (B) Mary will increase her savings in the work period if the income effect is greater than the substitution effect for her. (C) Mary will increase her savings in the work period if the substitution effect is greater than the income effect for her. (D) Both a and c are correct.

22. In an imaginary economy, consumers buy only sandwiches and magazines. The fixed basket consists of 20 sandwiches and 30 magazines. In 2006, a sandwich cost $4 and a magazine cost $2. In 2007, a sandwich cost $5. The base year is 2006. If the consumer price index in 2007 was 125, then how much did a magazine cost in 2007? (A) $0.83 (B) $2.25 (C) $2.50 (D) $3.00

23. Other things the same, if the government increases transfer payments to households, then the effect of this on the government's budget (A) will make equilibrium interest rate rise and equilibrium investments increase. (B) will make equilibrium interest rate rise and equilibrium investments decrease. (C) will make equilibrium interest rate fall and equilibrium investments increase. (D) will make equilibrium interest rate fall and equilibrium investments decrease.

24. Assume there is a multiplier effect, some crowding out, and no accelerator effect. An increase in government expenditures changes aggregate demand more, (A) the smaller the MPC and the stronger the influence of income on money demand. (B) the smaller the MPC and the weaker the influence of income on money demand. (C) the larger the MPC and the stronger the influence of income on money demand. (D) the larger the MPC and the weaker the influence of income on money demand.

25. Assume the multiplier is 5 and that the crowding-out effect is $30 billion. An increase in government purchases of $20 billion will shift the aggregate-demand curve to the (A) right by $130 billion. (B) right by $70 billion. (C) right by $50 billion. (D) right by $10 billion.

26. If the natural rate of unemployment falls, (A) both the short-run and long-run Phillips curves shift left. (B) the short-run Phillips curve shifts left, the long-run Phillips curve is unchanged. (C) the short-run Phillips curve is unchanged, the long-run Phillips curve shifts right. (D) the short-run and the long-run Phillips curves shift right.

27. A policy that raised the natural rate of unemployment would shift (A) both the short-run and the long-run Phillips curves to the right. (B) the short-run Phillips curve right but leave the long-run Phillips curve unchanged. (C) the long-run Phillips curve right but leave the short-run Phillips curve unchanged. (D) neither the long-run Phillips curve nor the short-run Phillips curve right.

28. More flexible labor markets will shift (A) both the long-run Phillips curve and the long-run aggregate supply curve to the right. (B) both the long-run Phillips curve and the long-run aggregate supply curve to the left. (C) the long-run Phillips curve to the right and the long-run aggregate supply curve to the left. (D) the long-run Phillips curve to the left and the long-run aggregate supply curve to the right.

29. If the minimum wage increased, then at any given rate of inflation (A) both output and employment would be higher. (B) neither output nor employment would be higher. (C) output would be higher and unemployment would be lower. (D) output would be lower and unemployment would be higher.

30. In the open-economy macroeconomic model, if the supply of loanable funds increases, net capital outflow (A) and the real exchange rate increase. (B) and the real exchange rate decrease. (C) increases and the real exchange rate decreases. (D) decreases and the real exchange rate increases.

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