1.Greater optimism regarding the expected profits from investment projects

Select one:

a.causes a movement downward along the demand for loanable funds curve.

b.shifts the demand for loanable funds curve rightward.

c.shifts the demand curve for loanable funds curve downwards.

d.shifts the demand for loanable funds curve leftward.

e.causes a movement upward along the demand for loanable funds curve.

2.In the short run, which of the following actions increases the interest rate?

Select one:

a.An increase in the quantity of money

b.An increase in bond prices

c.An increase in aggregate demand.

d.An increase in the demand for money

e.A decrease in the demand for money

3.The fiscal deficit tends to fall during the expansion phase of a business cycle because tax revenues ________ and government transfer payments ________.

Select one:

a.decrease; increase

b.increase; decrease

c.increase; increase

d.decrease; decrease

e.decrease; stays same.

4.If consumer confidence in the economy improves after COVID-19 pandemic and, as a result, real GDP increases above potential GDP. To move real GDP back to potential GDP, the Reserve Bank should

Select one:

a.cut the income tax rate.

b.decrease the government's budget deficit.

c.raise the overnight policy rate.

d.lower the overnight policy rate.

e.increase the government's budget deficit.

5.If the Reserve Bank lowers the domestic interest rate, then we know that

Select one:

a.the exchange rate will also decline.

b.other short-term interest rates will rise.

c.other short-term interest rates will fall.

d.Both answers A and C are correct.

e.None of the above are correct.