1.When people are convinced to increase the percentage of their income devoted to saving:Immersive Reader

(8 Points)

Interest rate and income level decrease

Interest rate increases and income level decreases

Interest rate and income level increase

Interest rate decreases and income level increases

2.Choose the correct statement:Immersive Reader

(8 Points)

A change in price in the IS-LM model resulting from a change in the income level represents a movement along the aggregate demand curve. A change in income in the IS-LM model for a given price level represents a shift in the aggregate demand curve.

A change in income in the IS-LM model resulting from a change in the price level represents a movement along the aggregate demand curve. A change in price in the IS-LM model for a given income level represents a shift in the aggregate demand curve.

A change in income in the IS-LM model resulting from a change in the price level represents a movement along the aggregate demand curve. A change in income in the IS-LM model for a given price level represents a shift in the aggregate demand curve.

A change in price in the IS-LM model resulting from a change in the income level represents a movement along the aggregate demand curve. A change in price in the IS-LM model for a given income level represents a shift in the aggregate demand curve.

3.September 11, 2001 attacks increased uncertainty about what the future would hold. Such uncertainty:Immersive Reader

(8 Points)

Increased spending, shifted the LM curve to the right and resulted in higher level of income

Reduced spending, shifted the LM curve to the left and resulted in higher interest rates

Reduced spending, shifted the IS curve to the left and resulted in lower interest rates.

Increased spending, shifted the IS curve to the right and resulted in higher level of income

4.In the Mundell-Fleming model with floating exchange rates, a reduction in the money supply will:Immersive Reader

(10 Points)

Lower the income level, raise the interest rate, lower net exports, maintain the exchange rate constant

Lower the interest rate, raise the income level, decrease the exchange rate, increase net exports

Raise the interest rate, lower the income level and the exchange rate, raise net exports

Raise the interest rate, lower the income level, raise the exchange rate, lower net exports