1, The interest rate banks charge each other is called the

prime interest rate.

real interest rate.

discount rate.

nominal interest rate.

federal funds rate.

2. If the CPI is 4.5 percent and the interest rates banks charge customers on loans is 10.5 percent, the real interest rate is

15 percent.

10.5 percent.

6 percent

4.5 percent.

2.33 percent.

3. If the money supply increases while velocity remains stable, we would expect to see

an increase in nominal GDP.

an increase in real GDP.

a decrease in nominal GDP.

a decrease in real GDP.

a decrease in interest rates.

4. The spending multiplier will increase when the

marginal propensity to consume increases.

marginal propensity to save increases.

interest rates increases.

savings rate increases.

investment rate increases.

5. When exports increase, we can expect what changes in price level and real GDP?

Price Level / Real GDP

Decrease / Indeterminate

Increase / Increase

Increase / Decrease

Increase / Indeterminate

Decrease / Increase

Decrease / Decrease

6. If the Federal Reserve buys securities, we would expect to see an increase in

all consumer spending.

investment spending.

government spending.

tax rates.

interest rates.

7. With an MPC of .75, the government spending multiplier will be

1.

2.

4.

5.

8.

8. All of the following are reasons the AD curve is down slopingexcept

when prices rise in an economy, the real value of household income declines causing decreased consumer spending.

when prices rise in an economy, more households seek loans, decreasing investment and consumer spending as interest rates rise.

when prices rise in an economy, consumers tend to buy cheaper foreign products and fewer domestic products resulting in a decrease in net exports.

when prices rise in an economy, consumers tend to spend more on domestic goods.

when prices rise in an economy, consumers tend to spend less on domestic goods.

9. Which of the following will cause an increase in SRAS?

a decrease in labor productivity

an increase in employee wages

a decrease in government regulations on businesses

an increase in consumer spending

a decrease in investment spending

10. Stagflation in the economy would be caused by a

rightward shift of AD.

leftward shift of AD.

rightward shift of AS.

leftward shift of AS.

leftward shift of LRAS.