6. The constant returns to scale assumption in the endogenous growth model implies that: A) countries will definitely reach a steady-state equilibrium. B) if there are constant returns to one input alone, there will be increasing returns to scale to all factors of production taken together. C) the production function will have a concave shape. D) the production function will have a convex shape. E) the capital-labour ratio will be constant at the steady-state. 7. In the AD-AS model, in the long-run, a decrease in the real money supply: A) will result in a movement along a horizontal AS curve. B) may be the result of equilibrium prices decreasing following a contractionary fiscal policy. C) causes the actual unemployment rate to fall below the natural rate of unemployment. D) is caused by a decrease in the interest rate. E) decreases consumers’ disposable income. 8. Decreasing government expenditure is effective at: A) increasing the level of output in the short-run, because lower prices act as an incentive for consumers to purchase more. B) decreasing prices in the short-run, because as firms reduce production, wages will decline. C) reducing the level of output in the long-run, with no effect on the price level. D) limiting inflationary pressure by reducing the long-run supply of goods and services. E) limiting inflationary pressure in the long-run, without lowering employment. 9. Reducing income tax rates will most likely cause a: A) large increase in output, and a large increase in tax revenues. B) large budget deficit, which will negatively affect income growth. C) small increase in AS, and a small increase in AD. D) large increase in AD, and a small increase in AS. E) simultaneous increase in prices and the rate of unemployment. 10. Given the inflation-augmented Phillips curve, if the actual rate of unemployment is below the natural rate: A) inflation will increase provided expected inflation is positive. B) inflation will decrease provided expected inflation is positive. C) actual inflation equals expected inflation. D) actual inflation will be larger the lower the responsiveness of prices to the unemployment gap. E) it is not possible to determine whether inflation increases or decreases without more information.