1. If the interest rate decreases in an economy, it will (A) decrease the investment expenditure in the economy.

(B) increase the loan repayment by the government.

(C) increase the consumption expenditure in the economy.

(D) increase the total savings in the economy.

2.

In the aggregate demand and aggregate supply model, an expansionary monetary policy (A) increases aggregate demand by reducing interest rates.

(B) increases aggregate demand by raising interest rate.

(C) reduces aggregate demand by reducing interest rates

(D) reduces aggregate demand by raising interest rates.

3. According to the crowding-out effect, if the government borrows to finance deficit spending, (A) the demand for loanable funds will decrease, driving interest rates down.

(B) the demand for loanable funds will increase, driving interest rates up.

(C) the supply for loanable funds will increase, driving interest rates up.

(D) the supply for loanable funds will decrease, driving interest rates down.

4 Maryam is unemployed if she

(A) is temporarily laid off.

(B) is not looking for a job.

(C) has looked for a job for two months and then quit searching for a job.

(D) becomes a full time housewife.

5. The increase in unemployment that occurs during recessions and depressions is called

(A) frictional unemployment.

(B) structural unemployment.

(C) cyclical unemployment. (D) seasonal unemployment.