Question

1. At higher rates of interest

   		households save less because it is more expensive to save.
   		businesses demand more investment because there are more funds available to invest.
   		households save more because they get a greater return on their savings.
   		businesses demand more investment because future profitability is likely to be greater.

2. According to Keynesian economics using the modern short-run aggregate supply curve, if there are unutilized resources in the economy and the aggregate demand decreases

   		real GDP will fall and price level will fall.
   		real GDP will rise and price level will rise.
   		real GDP will rise and price level will remain constant.
   		real GDP will fall and price level will remain constant.

3. A temporary embargo on oil from the Middle East going in to the United States would

   		shift only the long-run aggregate supply curve to the left.
   		shift only the short-run aggregate supply curve to the left.
   		shift both the short-run and long-run aggregate supply curves to the left.
   		shift the long-run aggregate supply curve to the right.

Answer 1

1. Option 3. Households save more because they get a greater return on their savings.

Explanation: Higher interest rate increases the interest income of households which provides more incentives to save.