Question 1 [5] MULTIPLE-CHOICE QUESTIONS Each of the following sub-questions contains one statement but with multiple possible answers. Only one of the answers is correct. Read each statement very carefully and then decide which one of the options is the correct one. Write down only the number of the sub-question and next to it the letter that represents the answer you have selected. Example: If you believe that for sub-question 1.6 option C is correct, then write down: 1.6. C.

1.1. A decrease in the rate of interest _____ A. lowers the opportunity cost of money and leads to an increase in the quantity of money demanded. B. raises the opportunity cost of money and leads to an increase in the quantity of money demanded. C. lowers the opportunity cost of money and leads to a decrease in the quantity of money demanded. D. raises the opportunity cost of money and leads to a decrease in the quantity of money demanded. E. does not affect the quantity of money demanded.

1.2.	If government spending is higher than current government revenue, this is known as _____

A. a deficit on the current account of the balance of payments. B. the budget deficit. C. the public debt. D. money financing. E. good fiscal management.

1.3. The foreign exchange rate is the rate at which _____ A. one country's goods trade for those of another country. B. the currency of one country trades for the goods of another country. C. currencies of different countries are exchanged. D. one country's currency trades for silver provided by another country. E. the services of one country trade for the currency of another country.

1.4.	According to the Keynesian model, the most important determinant of a household's consumption is _____

A. its disposable income. B. its total wealth. C. the number of persons in the household. D. its net wealth. E. the ratio of wage to non-wage income that the household earns. 1.5. Which one of the following is not a component of aggregate expenditure? A. Consumption expenditure by consumers B. Investments C. Autonomous consumption D. Induced consumption E. Savings