A contractionary monetary policy is likely to lead to ________

The quantity of real GDP supplied decreases if the price level ________ because it ________ profits

A) falls; decreases B) rises; increases C) rises; decreases D) falls; increases E) None of the above answers is correct because the AS curve is vertical so that the quantity of real GDP supplied does not change when the price level changes.

According to the research of Christina Romer and David Romer:

A. a tax reduction of 1 percent of GDP lowers real GDP by roughly 2 to 3 percent. B. a tax increase of 1 percent of GDP lowers real GDP by roughly 2 to 3 percent. C. a tax reduction of 2 to 3 percent raises real GDP by roughly 1 percent. D. a tax increase of 2 to 3 percent lowers real GDP by roughly 1 percent.