Question

Question 16 (1 point)

If the price level increases in the United States relative to foreign countries, then American consumers will purchase more foreign goods and fewer U.S. goods. This statement describes:

Question 16 options:

	the output effect.
	the shift-of-spending effect.
	the real-balances effect.
	the foreign purchases effect.

Question 17 (1 point)

Refer to the diagram. If the initial aggregate demand and supply curves are AD0 and AS0, the equilibrium price level and level of real domestic output will be:

Question 17 options:

	E and B, respectively.
	F and A, respectively.
	G and B, respectively.
	F and C, respectively.

Question 18 (1 point)

Graphically, cost-push inflation is shown as a:

Question 18 options:

	rightward shift of the AD curve.
	leftward shift of the AS curve.
	rightward shift of the AS curve.
	leftward shift of the AD curve.

Question 19 (1 point)

The multiplier effect means that:

Question 19 options:

	an increase in investment can cause GDP to change by a larger amount.
	a decline in the MPC can cause GDP to rise by several times that amount.
	consumption is typically several times as large as saving.
	a change in consumption can cause a larger increase in investment.

Question 20 (1 point)

Other things equal, a decrease in the real interest rate will:

Question 20 options:

	expand investment and shift the AD curve to the right.
	reduce investment and shift the AD curve to the left.
	reduce investment and shift the AD curve to the right.
	expand investment and shift the AD curve to the left.

Answer 1

1) The statement describes the foreign purchase effect. When the local goods get costlier the consumer starts demand foreign goods this increases the imports and reduce the exports. The answer is "D" foreign purchase effect.

2) The equilibrium price level will be the point where the So and Do meets. It is F price and C quantity. The answer is "D".

3) Cost-push inflation means a situation where the supply price has increase it leads to a shift in the supply curve at a higher price and lower quantity. The leftward shift of AS curve and answer is "B".

4) "A"

A multiplier means an increase in the GDP several times the amount of investment. For example, if the investment is increased by $100 GDP will increase by 4400. That means Multiplier is equal to 4.

5) The decrease in the interest rate will expand investment because now borrowing is cheaper and increase demand which will shift the AD curve to a higher quantity and higher price i.e. to the right.

The answer to this question is "A".