Section I: Multiple Choice Questions

During the expansion phase of the business cycle, a$)$ employment decreases.

$)$ income decreases.

C$)$ unemployment increases.

D$)$ production increases.

Because of the slope of the aggregate demand curve we can say that

A$)$ a decrease in the price level leads to a higher level of aggregate spending.

$)$ a decrease in the price level leads to a lower level of aggregate spending.

c$)$ a decrease in the price level leads to a higher level of aggregate supply.

D$)$ an increase in the price level leads to a higher level of aggregate spending.

The interest rate effect is described as an increase in the price level which

A$)$ lowers the interest rate thereby reducing government spending.

$)$ lowers the interest rate thereby reducing investment and consumption spending.

C$)$ raises the interest rate thereby reducing government spending.

D$)$ raises the interest rate thereby reducing investment and consumption spending.

The international trade effect states that

A$)$ an increase in the price level will raise net exports.

B$)$ an increase in the price level will lower net exports.

C$)$ an increase in the price level will raise exports.

D$)$ an increase in the price level will lower imports.

Which of the following will shift the aggregate demand curve to the right, ceteris paribus?

A$)$ an increase in interest rates

B$)$ a decrease in disposable income

C$)$ a decrease in expected profits for firms

D$)$ an increase in net exports

A decrease in aggregate demand results in a$($n$)$ in the

A$)$ recession; long run

B$)$ expansion; long run

C$)$ expansion; short run

D$)$ recession; short run