1.B
2.C
3.C
4B
5.C
6.A
7.A
8.D
9.A
10.
a. In the long run:
Y = 2(1500/P) =3000/P
Y = 3000
P=1
b. New short-run:
P=1
Y = 2(2000/1) = 4000
c. New long-run:
Y = 3000
3000 = 2(2000/P)  P = 4/3
11.
a. In the long run:
Y = 2(1500/P) =3000/P
Y = 3000
P=1
b. V = 1.3000/1500 = 2
c. New short-run:
Y = 1,5.(1500/1) = 2250
P=1
d. V = 1.2250/1500 = 1.5
e. New long-run:
Y = 3000
3000 = 1.5(1500/P)  P = 0.75
12.
SRAS shift to the left, making outputs decrease in price increases. In the long run, price
decreases, making output rise and equilibrium shift from B to A again.
13.
a. In the SR, the decrease in demand will lead to a decrease in price and and output will
be reduced.
b. The government can increase the supply, which shift the SRAS curve to the right,
leading to the decrease in price and increase in output.
c. The long run impact is that
PART 2
1.D
2.C
3.B
4.C
6.
a. Tax cut does not change the money supply because only central bank can. A change in
money supply will shift the LM curve.
b. Tax cut will lead to the increase in disposable income, which shift the IS curve.
c. Using the word “money” is not correct.  "When people have more diposable income
thank to tax cut, they can spend it on goods and services."
PART 3
1.D
14.A
2.B
3.C
4.B
5.D
6.D
7.C
8.A
9.A
10.A 11.D 12.D 13.C