ECON 207 quiz 4
b
If people decide to hold less money, then a. money demand decreases, there is an excess supply of money, and interest rates rise b. money demand decreases, there is an excess supply of money, and interest rates fall c. money demand increases, there is an excess demand for money, and interest rates fall d. money demand increases, there is an excess demand for money, and interest rates rise
a
According to liquidity preference theory, a decrease in money demand for some reason other than a change in the price level causes a. interest rate to fall, so AD shifts right b. interest rate to fall, so AD shifts left c. interest rate to rise, so AD shifts right d. interest rate to rise, so AD shifts left
a
Aggregate demand shifts right when the government a. decreases taxes b. cuts military expenditures c. repeals an investment tax credit d. none of the above
c
In 2009 Congress passed legislation providing states with funds to build roads and bridges. It also instituted tax cuts. Which of these shifts aggregate demand right? a. only the increased funding for states b. only the tax cuts c. both the increased funding for states and tax cuts d. neither
c
In a certain economy, when income is $500, consumer spending is $375. The value of the multiplier for this economy is 5. It follows that, when income is $510, consumer spending is a. $381.67 b. $378 c. $383 d. $383.33
a
In the short run, open-market purchases a. increase investment and real GDP, and decrease nominal interest rates b. increase real GDP and nominal interest rates, and decrease investment c. increase investment and nominal interest rates, and decrease real GDP d. decrease investment, nominal interest rates, and real GDP
wealth effect
consumption falls when price increases
interest rate effect
investment falls when price increases
a
A decrease in US interest rates leads to a. a depreciation of the dollar that leads to greater net exports b. a depreciation of the dollar that leads to smaller net exports c. an appreciation of the dollar that leads to greater net exports d. an appreciation of the dollar that leads to smaller net exports
b
An increase in government spending a. increases the interest rate and so investment spending increases b. increases the interest rate and so investment spending decreases c. decreases the interest rate and so investment spending increases d. decreases the interest rate and so investment spending decreases
c
As the price level rises, a. exchange rate falls, so net exports fall b. exchange rate falls, so net exports rise c. exchange rate rises, so net exports fall d. exchange rate rises, so net exports rise
b
Other things the same, if the US price level falls, then a. US residents want to buy more foreign bonds. The real exchange rate rises b. US residents want to buy more foreign bonds. The real exchange rate falls. c. US residents want to buy fewer foreign bonds. The real exchange rate rises. d. US residents want to buy fewer foreign bonds. The real exchange rate falls.
decreases
What happens to interest rate when price level decreases?
a
When the dollar depreciates, US... a. net exports rise, which increases the aggregate quantity of goods and services demanded b. net exports rise, which decreases the aggregate quantity of goods and services demanded. c. net exports fall, which increases aggregate quantity of goods and services demanded d. net exports fall, which decreases aggregate quantity of goods and services demanded
d
When the interest rate is above the equilibrium level, a. the quantity of money that people want to hold is less than the quantity of money that the Federal Reserve has supplied b. people respond by buying interest-bearing bonds or by depositing money in interest-bearing bank accounts c. bond issuers and banks respond by lowering the interest rates they offer d. All of the above
exchange rate effect
net exports fall when price increases
