1.As price level rises and money demand increases, nominal interest rates rise as well. Based on the interest rate effect, what is the likely outcome of this change?

a. Output demanded in the U.S. increases and firms increase production

b. Output demanded in the U.S. decreases and firms decrease production

c. Aggregate demand increases

d. Aggregate demand decreases

e. Long-run aggregate supply decreases.

2.GDP is an indicator of a nation's production of goods and services in a given year. Which of the following would cause an increase in a nation's GDP?

a. Foreign oil is purchased

b. Sales of used automobiles increase dramatically

c. A carpenter builds a dining room table for his daughter's apartment

d. Fees are earned by a broker for the purchase of financial assets for her clients

e. A mechanic restores his own vintage automobile.

3.The change in aggregate demand resulting from an increase in household disposable income would affect money demand and nominal interest rates in which of the following ways?

a. No change in money demand and an increase in nominal interest rates

b. Increase in money demand and an increase in nominal interest rates

c. Increase in money demand and a decrease in nominal interest rates

d. Decrease in money demand and no change in nominal interest rates

e. Decrease in money demand and indeterminate in nominal interest rates