Which of the following is likely more important for explaining the slope of the aggregate-demand curve of a small economy than it is for the United States?a.the interest-rate effectb.the real-wage effectc.the wealth effectd.the exchange-rate effect1 points QUESTION 9People will want to hold more money if the price levela.or if the interest rate decreases.b.decreases or if the interest rate increases.c.or if the interest rate increases.d.increases or if the interest rate decreases.1 points QUESTION 10Which of the effects listed below increases the quantity of goods and services demanded when the price level falls and decreases the quantity of goods and services demanded when the price level rises?a.the wealth effectb.the interest-rate effectc.the exchange-rate effectd.All of the above are correct.1 points QUESTION 11Which of the following correctly explains the crowding-out effect?a.A decrease in government expenditures decreases the interest rate and so reduces investment spending.b.An increase in government expenditures increases the interest rate and so reduces investment spending.c.A decrease in government expenditures increases the interest rate and so increases investment spending.d.An increase in government expenditures decreases the interest rate and so increases investment spending.1 points QUESTION 12If the stock market crashes, thena.aggregate demand increases, which the Fed could offset by increasing the money supply.b.aggregate demand decreases, which the Fed could offset by decreasing the money supply.c.aggregate demand increases, which the Fed could offset by decreasing the money supply.d.aggregate demand decreases, which the Fed could offset by increasing the money supply.1 points QUESTION 13When the Fed lowers the growth rate of the money supply, it must take into accounta.only the short-run effect on production.b.only the short-run effects on inflation and production.c.the long-run effect on inflation as well as the short-run effect on production.d.only the long-run effect on inflation.1 points QUESTION 14The theory of liquidity preference illustrates the principle thata.monetary policy can be described either in terms of the exchange rate or the interest rate.b.monetary policy must be described in terms of the money supply.c.monetary policy must be described in terms of the interest rate.d.monetary policy can be described either in terms of the money supply or in terms of the interest rate.1 points QUESTION 15Which of the following events would shift money demand to the left?a.an increase in the price level, but not an increase in the interest rateb.an increase in the interest rate or an increase in the price levelc.an increase in the interest rate, but not an increase in the price leveld.neither an increase in the interest rate nor an increase in the price level
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