On the graph above, suppose the economy is at point 1. Which sequence of points best illustrates the short-run and then long-run impacts of a permanent tax reduction? [Assume that potential output remains constant at .]

Assuming all else equal, the demand curve for reserves in an economy shifts to the left. Which of the following could be a likely reason for this shift?

A) An increase in the federal funds rate B) A decrease in the federal funds rate C) Rapid contraction of the economy D) Rapid expansion of the economy

Suppose the population of Timmy Town is 1000 people and the working-age population is 800. If 200 of these people are unemployed, the unemployment rate in Timmy Town is

A) 1/4 × 100. B) 1/5 × 100. C) 1/8 × 100. D) 2 percent. E) There is not enough information provided to calculate the unemployment rate.