Question 21 Assume that the money market is in equilibrium, with a nominal interest rate of ro. Following a decrease in aggregate demand within the economy, which of the following should occur?

A The money demand curve will shift right (increase), and the interest rate will decrease.

B The money supply curve will shift left (decrease), and the interest rate will increase.

C The money demand curve will shift left (decrease), and the interest rate will decrease.

D There will be an increase in the equilibrium quantity of money, with an indeterminate impact on the nominal interest rate.

E The money demand will increase, the money supply will decrease, and the interest rate will increase.

Question 22 Which of the following will lead to an increase in a country's aggregate demand?

A A decrease in the price level

B An increase in income taxes

C A decrease in transfer payments

D An increase in exports

E A decrease in the depreciation of capital equipment

Question 23 Which of the following is true in the circular flow model of the economy?

A Households are demanders in the output market and demanders in the input market.

B Firms are demanders in the output market and demanders in the input market.

C Households are demanders in the output market and suppliers in the input market.

D Households are suppliers in the output market, and firms are suppliers in the input market.

E Firms are suppliers in the output market, and households are demanders in the input market.

Question 24 Which of the following options is likely to happen when a country is experiencing a high inflation rate?

A Investment level rises.

B Nominal interest rates fall.

C Real value of money falls.

D Real value of money stock rises.

E Shoe leather costs fall.

Question 25

Use the graph to answer the question that follows.