Suppose households decide to hold less money in checking accounts and cash, decreasing money demand.According to the macroeconomic model, what happens in the money and goods markets?

a.The real interest rate decreases.This increases investment and aggregate demand, which raises output and inflation.

b.The real interest rate increases.This decreases investment and aggregate demand, which reduces output and inflation.

c.The real interest rate increases.This increases input costs and decreases aggregate supply, which reduces output and raises inflation.

d.The real interest rate decreases.This decreases input costs and increases aggregate supply, which raises output and reduces inflation.

Suppose equilibrium output starts equal to potential, but then international lenders increase their demand for the dollar in the exchange market.After all three markets in the macroeconomic model fully adjust, and output is back at potential, what is the result?

a.Inflation is higher.The real interest rate is higher.The exchange value of the dollar is higher.Investment and exports are lower.Imports are higher.

b.Inflation is lower.The real interest rate is lower.The exchange value of the dollar is lower.Investment and exports are higher.Imports are lower.

c.Inflation is higher.The real interest rate is higher.The exchange value of the dollar is lower.Investment is lower, but exports are higher.Imports are lower.

d.Inflation is lower.The real interest rate is lower.The exchange value of the dollar is higher.Investment is higher, but exports are lower.Imports are higher.

Suppose transfer payments in the consumption function decrease.As a result,

a.Aggregate demand increases, increasing output and inflation.

b.Aggregate supply increases, increasing output and decreasing inflation.

c.Aggregate demand decreases, decreasing output and inflation.

d.Aggregate supply decreases, decreasing output and decreasing inflation.