Assume the economy is initially in equilibrium on AD2 and AS2. Which curve would have shifted, and in what direction would it have shifted, if a new equilibrium were to occur at an output level of $300 billion and a price level of P3 in Figure 8.3?

Consider the IS-LM curves for an economy with flexible exchange rates. An increase in the foreign income will result in the:

A) LM curve shifting to the right. B) IS curve shifting to the right. C) LM curve shifting to the left. D) IS curve shifting to the left.

If diplomas work efficiently in signaling productive capabilities to employers, the resulting equilibrium

A) will be a separating equilibrium. B) will be a pooling equilibrium. C) will always be inefficient. D) will never be efficient.