1)

Which of the following statements corresponds with the wealth effect?

• a.) As the price of borrowing declines, purchases of durable goods (cars, houses) increase and so do investments.
• b.) As the price level falls, people feel as if they have more money and purchase more goods.
• c.) As the price level falls in other countries, Americans buy more goods abroad.
• d.) As the price level falls, demand stays the same.

2)

Which of the following is true regarding exchange rates?

• a.) Exchange rates are set by governments and do not change often.
• b.) Economics models can accurately pinpoint changes in exchange rates using economic indicators.
• c.) Exchange rates are stable and predictable.
• d.) Exchange rates are influenced by the market and subject to volatility.