Question

1. A decrease in interest rates will ___ the cost of acquiring funds for investment projects, other things equal.

-Increase

-Have an indeterminate effect on

-Not change

-Decrease

2. The IS curve

-Shows combinations of interest rates and output levels where the goods market is in equilibrium

-Is upward sloping because higher interest rates increase aggregate demand

-Was created by the CIA in the 1960s as anti-Soviet propaganda

-Shifts if the money supply changes

3. If firms invent new technologies, this would cause

-The short-run aggregate supply curve to become nearly vertical at all levels of output

-The short-run aggregate supply curve to shift to the left

-The short-run aggregate supply curve to become flatter

-The short-run aggregate supply curve to shift to the right

4. The upward sloping short-run aggregate supply curve can be explained by

-Assuming that wage costs are fixed by contracts

-Increases in the money supply

-Government subsidies

-The fact that more technology leads to more output

5. Decreasing the required reserve ratio shifts the money supply curve to the _ and ___ the equilibrium interest rate.

-Right, increases

-Left, decreases

-Right, decreases

-Left, increases

Answer 1

1)

Answer: (D)

The fall in the decrease in the interest will cause the fall in the cost of fund available in the market.

2)

Answer: (A)

IS curve shows the goods market equilibrium through the interest rate and income.

3)

Answer: (D)

Technological change shifts the supply curve to right.

4)

Answer: (A)

Some inputs are fixed, thus some input affects the supply and it become slops upwards.

5)

Answer: ( C)

Decrease in the reserve ratio will increase the supply and interest rate will decline.