26. What can directly change aggregate demand and long-run aggregate supply?

A) GDP in the rest of the world (R.O.W.).

B) resource input prices.

C) interest rates.

D) value of the Canadian dollar.

E) business investment.

27. Rising average prices and lower unemployment most likely come from

A) higher interest rates.

B) lower income tax rates.

C) increases in the value of the Canadian dollar.

D) improved technologies.

E) investor pessimism.

28. The "Yes - Markets Self-Adjust" camp argues that in a recessionary gap, all of these market adjustments will happenexcept,

A) price adjustments in the loanable funds market fix the saving problem for Say's Law.

B) falling wage rates decrease the quantity of labour demanded.

C) falling interest rates increase business investment.

D) falling output prices increase aggregate quantity demanded.

E) falling output prices increase net exports.

29. Last week Clinton paid off $10,000 on his student loan. As a result,

A) both M1+ and M2+ increased.

B) the money supply was not affected.

C) M1+ increased but M2+ decreased.

D) the money supply decreased.

E) the money supply increased.

30. Suppose you deposit $2,000 cash in your bank. The bank desires to hold 20 percent of all deposits as reserves. What amount of new loans will your bank create immediately after you make the deposit?

A) $400.

B) $8,000.

C) $1,600.

D) $2,000.

E) $10,000.

31. When there is an excess supply of bonds, bond prices

A) rise and the price of money falls.

B) rise and the price of money rises.

C) fall and the interest rate rises.

D) fall and the interest rate falls.

E) fall and the price of money falls.

32. Through the domestic monetary transmission mechanism, decreases in money demand cause

A) lower interest rates, which are a positive demand shock.

B) higher interest rates, which are a positive demand shock.

C) higher interest rates, which are a negative supply shock.

D) lower interest rates, which are a negative demand shock.

E) higher interest rates, which are a negative demand shock.