Font size
WorksheetsMac
Total questions: 92
Worksheet time: 2hrs 32mins
In the long run, inflation is caused by
Banks that have market power and refuse to lend money.
Governments that raise taxes so high that it increases the cost of doing business and, hence, raises prices.
Governments that print too much money.
Increases in the price of inputs, such as labor and oil.
None
What prices rise at an extraordinarily high rate, it is called
inflation
Hyperinflation.
Deflation.
Disinflation
If the price level doubles,
The quantity demanded of money falls by half.
The money supply has been cut by half.
The value of money has been cut by half.
Nominal income is unaffected.
None of the above is true.
In the long run, the demand for money is most dependent upon
The level of prices.
The availability of credit cards.
The availability of banking outlets.
The interest rate.
The quantity theory of money concludes that an increase in the money supply causes
a. A proportional increase in velocity.
b. A proportional increase in price.
c. A proportional increase in real output.
d. A proportional decrease in velocity.
e. A proportional decrease in prices.
A proportional increase in velocity.
A proportional increase in price.
A proportional increase in real output.
A proportional decrease in velocity.
A proportional decrease in prices.
An example of a real variable is
The nominal interest rate.
The ratio of the value of wages to the price of soda.
The price of corn.
The dollar wage.
None of the above.
The quantity equation states that
Money x price level = velocity x real output.
Money x real output = velocity x price level.
Money x velocity = price level x real output.
None of the above is true.
If money is neutral,
An increase in the money supply does nothing.
The money supply cannot be changed because it is tied to a commodity such as gold.
A change in the money supply only affects real variables such as real output.
A change in the money supply only affects nominal variables such as prices and dollar wages.
A change in the money supply reduces velocity proportionately; therefore, there is no effect on either prices or real output.
If the money supply grows 5 percent, and real output grows 2 percent, prices should rise by
5 percent.
Less than 5 percent.
More than 5 percent.
None of the above.
Velocity is
The annual rate of turnover of the money supply.
The annual rate of turnover of output.
The annual rate of turnover of business inventories.
Highly unstable.
Impossible to measure.
Suppose the nominal interest rate is 7 percent while the money supply is growing at a rate of 5 percent per year. Assuming real output remains fixed, if the government increases the growth rate of the money supply from 5 percent to 9 percent, the Fisher effect suggests that, in the long run, the nominal interest rate should become
4 percent
9
11
12
16
Countries that employ an inflation tax do so because
The government doesn't understand the causes and consequences of inflation.
The government has a balanced budget
Government expenditures are hight and the government has inadequate tax collections and difficulty borrowing
An inflation tax is the most equitable of all taxes
An inflation tax is the most progressive (paid by the rich) of all taxes
An inflation tax is
An explicit tax paid quarterly by business based on the amount of increase in the prices of their products
A tax on people who hold money
A tax on people who hold interest-bearing savings accounts
Usually employed by governments with balanced budgets
None of the above
If the nominal interest rate is 6 percent and the inflation rate is 3 percent, the real interest rate is
3 percent.
6 percent.
9 percent.
18 percent.
None of the above.
If actual inflation turns out to be greater than people had expected, then
Wealth was redistributed to lenders from borrowers.
Wealth was redistributed to borrowers from lenders.
No redistribution occurred.
The real interest rate is unaffected.
Which of the following costs of inflation does not occur when inflation is constant and predictable?
shoe leather costs
menu costs
costs due to inflation-induced tax distortions
arbitrary redistributions of wealth
costs due to confusion and inconvenience
Suppose that, because of inflation, a business in Russia must calculate, print, and mail a new price list to its customers each month. This is an example of
Shoe leather costs.
Menu costs.
Costs due to inflation-induced tax distortions.
Arbitrary redistributions of wealth.
The Friedman rule.
Suppose that, because of inflation, people in Brazil economize on currency and go to the bank each day to withdraw their daily currency needs. This is an example of
Shoe leather costs.
Menu costs.
Costs due to inflation-induced tax distortions.
Costs due to inflation-induced relative price variability, which misallocates resources.
Costs due to confusion and inconvenience.
If the real interest rate is 4 percent, the inflation rate is 6 percent, and the tax rate is 20 percent, what is the after-tax
1
2
3
4
5 percent
Which of the following statements about inflation is not true?
Unanticipated inflation redistributes wealth.
An increase in inflation increases nominal interest rate.
If there is inflation, taxing nominal interest income reduces the return to saving and reduces the rate of economic growth.
Inflation reduces people’s real purchasing power because it raises the cost of the things people buy.
An economy that interacts with other economies is known as
A balanced trade economy.
An export economy.
An import economy.
A closed economy.
An open economy.
Each of the following is a reason why the U.S. economy continues to engage in greater amounts of international trade except which one?
There are larger cargo ships and airplanes.
High-technology goods are more valuable per pound and, thus, more likely to be traded.
NAFTA imposes requirements for increased trade between countries in North America.
There have been improvements in technology that have improved telecommunications between countries.
All of the above are reasons for increased trade by the United States.
Which of the following statements is true about a country with a trade deficit?
Net capital outflow must be positive.Net capital outflow must be positive
Net exports are negative.
Net exports are positive.
Exports exceed imports.
None of the above is true.
Which of the following would directly increase U.S. net capital outflow?
General Electric sells an aircraft engine to Airbus in Great Britain.
Microsoft builds a new distribution facility in Sweden.
Honda builds a new plant in Ohio.
Toyota buys stock in AT&T.
Which of the following is an example of foreign direct investment?
McDonald’s builds a restaurant in Moscow.
Columbia Pictures sells the rights to a movie to a Russian movie studio.
General Motors buys stock in Volvo.
General Motors buys steel from Japan.
If Japan exports more than it imports,
Japan’s net exports are negative.
Japan’s net capital outflow must be negative.
Japan’s net capital outflow must be positive.
Japan is running a trade deficit.
If the United States saves $1,000 billion and U.S. net capital outflow is -$200 billion, U.S. domestic investment is
-$200 billion.
$200 billion.
$800 billion.
$1,000 billion.
$1,200 billion.
If the exchange rate changes from 3 Brazilian real per dollar to 4 reals per dollar,
The dollar has depreciated.
The dollar has appreciated.
The dollar could have appreciated or depreciated depending on what happened to relative prices in Brazil and the United States.
None of the above is true.
Suppose the real exchange rate between Russia and the United States is defined in terms of bottles of Russian vodka per bottle of U.S. vodka. Which of the following will increase the real exchange rate (that is, increase the number of bottles of Russian vodka per bottle of U.S. vodka)?
a decrease in the ruble price of Russian vodka
an increase in the dollar price of U.S. vodka
an increase in the number of rubles for which the dollar can be exchanged
All of the above will increase the real exchange rate
None of the above will increase the real exchange rate.
If the nominal exchange rate between British pounds and dollars is 0.5 pound per dollar, how many dollars can you get for a British pound?
2
1.5
1 dollar
0.5 of a dollar
None of the above is correct
Suppose the nominal exchange rate between the Japanese yen and the U.S. dollar is 100 yen per dollar. Further, suppose that a pound of hamburger costs $2 in the United States and 250 yen in Japan. What is the real exchange rate between Japan and the United States?
0.5 pound of Japanese hamburger/pound of American hamburger
0.8 pound of Japanese hamburger/pound of American hamburger
1.25 pounds of Japanese hamburger/pound of American hamburger
2.5 pounds of Japanese hamburger/pound of American hamburger
none of the above
Which of the following people or firms would be pleased by a depreciation of the dollar?
a U.S. tourist traveling in Europe
a U.S. importer of Russian vodka
a French exporter of wine to the United States
an Italian importer of U.S. steel
a Saudi Arabian prince exporting oil to the United States
Suppose a cup of coffee is 1.5 Euros in Germany and $0.50 in the United States. If purchasing-power parity holds, what is the nominal exchange rate between Euros and dollars?
1/3 euro per dollar
Euros per dollar
1.5 Euros per dollar
0.75 euro per dollar
Which of the following products would likely be the least accurate if used to calculate purchasing-power parity?
gold
automobiles
diamonds
dental services
Suppose the money supply in Mexico grows more quickly than the money supply in the United States. We would expect that
The peso should depreciate relative to the dollar.
The peso should appreciate relative to the dollar.
The peso should maintain a constant exchange rate with the dollar because of purchasing-power parity.
None of the above is true.
When people take advantage of differences in prices for the same good by buying it where it is cheap and selling it where it is expensive, it is known as
a. Purchasing-power parity.
b. Net capital outflow.
c. Arbitrage.
d. Net exports.
e. Currency appreciation.
Net capital outflow.
Arbitrage.
Net exports.
Currency appreciation.
Purchasing-power parity.
Suppose a U.S. resident buys a Jaguar automobile from Great Britain and the British exporter uses the receipts to buy stock in General Electric. Which of the following statements is true from the perspective of the United States?
Net exports fall, and net capital outflow falls.
Net exports rise, and net capital outflow rises.
Net exports fall, and net capital outflow rises.
Net exports rise, and net capital outflow falls.
None of the above is true.
Which of the following statements is not true about the relationship between national saving, investment, and net capital outflow?
Saving is the sum of investment and net capital outflow.
For a given amount of saving, an increase in net capital outflow must decrease domestic investment.
For a given amount of saving, a decrease in net capital outflow must decrease domestic investment.
An increase in saving associated with an equal increase in net capital outflow leaves domestic investment unchanged.
Suppose the inflation rate over the last 20 years has been 10 percent in Great Britain, 7 percent in Japan, and 3 percent in the United States. If purchasing-power parity holds, which of the following statements is true? Over this period,
The value of the dollar should have fallen compared to the value of the pound and the yen.
The yen should have risen in value compared to the pound and fallen compared to the dollar.
The yen should have fallen in value compared to the pound and raised compared to the dollar.
The value of the pound should have risen compared to the value of the yen and the dollar.
None of the above is true.
Which of the following statements regarding the loanable-funds market is not true?
An increase in a country’s net capital outflow raises its real interest rate.
An increase in a country’s net capital outflow shifts the supply of loanable funds to the left.
An increase in domestic investment shifts the demand for loanable funds to the right.
A decrease in a country’s net capital outflow shifts the demand for loanable funds to the left.
An increase in the government budget deficit
Increases the real interest rate and crowds out investment.
Decreases the real interest rate and crowds out investment.
Has no impact on the real interest rate and fails to crowd out investment because foreigners buy assets in the deficit country.
Does none of the above.
Which of the following statements regarding the loanable-funds market is true?
a. An increase in private savings shifts the supply of loanable funds to the left.
b. A decrease in the government budget deficit increases the real interest rate.
c. An increase in the government budget deficit shifts the supply of loanable funds to the right.
d. An increase in the government budget deficit shifts the supply of loanable funds to the left.
An increase in private savings shifts the supply of loanable funds to the left.
A decrease in the government budget deficit increases the real interest rate.
An increase in the government budget deficit shifts the supply of loanable funds to the right.
An increase in the government budget deficit shifts the supply of loanable funds to the left.
Other things unchanging, a higher U.S. real interest rate
Increases U.S. net capital outflow because U.S. residents and foreigners prefer to invest in the United States.
Decreases U.S. net capital outflow because U.S. residents and foreigners prefer to invest in the United States.
Decreases U.S. net capital outflow because U.S. residents and foreigners prefer to invest abroad.
None of the above.
An increase in Europe’s taste for U.S.-produced Fords would cause the dollar to
Depreciate and would increase U.S. net exports.
Depreciate and would decrease U.S. net exports.
Appreciate and would increase U.S. net exports.
Appreciate, but the total value of U.S. net exports stays the same.
An increase in the U.S. government budget deficit
Increases U.S. net exports and decreases U.S. net capital outflow.
Decreases U.S. net exports and increases U.S. net capital outflow.
Decreases U.S. net exports and U.S. net capital outflow the same amount.
Increases U.S. net exports and U.S. net capital outflow the same amount.
The phrase “twin deficits” refer to
A country’s trade deficit and its government budget deficit.
A country’s trade deficit and its net capital outflow deficit.
The equality of a country’s saving deficit and its investment deficit.
The fact that if a country has a trade deficit, its trading partners must also have a trade deficit.
Which of the following statements regarding the market for foreign-currency exchange is true?
An increase in U.S. net exports increases the supply of dollars and the dollar depreciates.
An increase in U.S. net exports decreases the supply of dollars and the dollar depreciates.
An increase in U.S. net exports decreases the demand for dollars and the dollar appreciates.
An increase in U.S. net exports increases the demand for dollars and the dollar appreciates.
Which of the following statements regarding the market for foreign-currency exchange is true?
An increase in U.S. net capital outflow increases the supply of dollars and the dollar appreciates.
An increase in U.S. net capital outflow increases the supply of dollars and the dollar depreciates.
An increase in U.S. net capital outflow increases the demand for dollars and the dollar appreciates.
An increase in U.S. net capital outflow increases the demand for dollars and the dollar depreciates.
If the United States imposes a quota on the importing of apparel produced in China, which of the following is true regarding the market for foreign-currency exchange?
The supply of dollars increases and the dollar depreciates.
The supply of dollars decreases and the dollar appreciates.
The demand for dollars increases and the dollar appreciates.
The demand for dollars decreases and the dollar depreciates.
If the United States imposes a quota on the importing of apparel produced in China, which of the following is true regarding U.S net exports?
Net exports will rise.
Net exports will fall.
Net exports will remain unchanged.
None of the above is true.
Suppose, due to political instability, Mexicans suddenly choose to invest in U.S. assets as opposed to Mexican assets. Which of the following statements is true regarding U.S. net capital outflow?
U.S. net capital outflow rises.
U.S. net capital outflow falls.
U.S. net capital outflow is unchanged because only U.S. residents can alter U.S. net capital outflow.
None of the above is true.
Suppose, due to political instability, Mexicans suddenly choose to purchase U.S. assets as opposed to Mexican assets. Which of the following statements is true regarding the value of the dollar and U.S. net exports?
The dollar appreciates, and U.S. net exports fall.
The dollar appreciates, and U.S. net exports rise.
The dollar appreciates, and U.S. net exports rise.
The dollar depreciates, and U.S. net exports rise.
An increase in U.S. private saving
Increases U.S. net exports and decreases U.S. net capital outflow.
Decreases U.S. net exports and increases U.S. net capital outflow.
Decreases U.S. net exports and U.S. net capital outflow the same amount.
Increases U.S. net exports and U.S. net capital outflow the same amount.
Which of the following statements about trade policy is true?
A restrictive import quota increases a country’s net exports.
A restrictive import quota decreases a country’s net exports.
A country’s trade policy has no impact on the size of its trade balance.
None of the above is true.
Which of the following groups would not benefit from a U.S. import quota on Japanese autos?
stockholders of Ford Motor Company
U.S. farmers who export grain
members of the United Auto Workers union
U.S. consumers who buy electronics from Japan
An example of a trade policy is
An increase in the government budget deficit because it reduces a country’s net exports.
Capital flight because it increases a country’s net exports.
A tariff on sugar.
All are examples of trade policy.
An export subsidy should have the opposite effect of
tariff
capital flight
a government budget deficit
an increase in private saving
Which of the following groups would be most harmed by a U.S government budget deficit?
U.S. residents wishing to buy foreign-produced autos
lenders of loanable funds
foreigners who wish to buy assets in the United States
Boeing Aircraft Manufacturing wishing to sell jets to Saudi Arabia
Capital flight
Decreases a country’s net exports and increases its long-run growth path.
Decreases a country’s net exports and decreases its long-run growth path.
Increases a country’s net exports and decreases its long-run growth path.
Increases a country’s net exports and increases its long-run growth path.
1. Which of the following statements about economic fluctuations is true? a. A recession is when output rises above the natural rate of output. b. A depression is a mild recession. Y
output are regular and predictable. d.) A variety of spending, income, and output measures can be used to measure economic fluctuations because most macroeconomic quantities tend to fluctuate together. e. None of the above is true.
A recession is when output rises above the natural rate of output.
A depression is a mild recession
Economic fluctuations have been termed the "business cycle" because the movement in output are regular and predictable
A variety of spending, income, and output measures can be used to measure economic fluctuations because most macroeconomic quantities tend to fluctuate together
None of the above is true.
According to the interest-rate effect, aggregate demand slopes downward (negatively) because
Lower prices increase the value of money holdings and consumer spending increases.
Lower prices increase the value of money holdings and consumer spending decreases.
Lower prices reduce money holdings, increase lending, interest rates fall, and investment spending increases.
Lower prices increase money holding, decrease lending, interest rates rise, and investment spending falls.
Which of the following would not cause a shift in the long-run aggregate-supply curve? a. an increase in the available labor
b. an increase in the available capital Can increase in the available technology
d. an increase in price expectations
e. All of the above shift the long-run aggregate-supply curve.
an increase in the available labor
an increase in the available capital
an increase in the available technology
an increase in price expectations
All of the above shift the long-run aggregate-supply curve.
Which of the following is not a reason why the aggregate-demand curve slopes downward?
the wealth effect
the interest-rate effect
the classical dichotomy / monetary neutrality effects
the exchange-rate effect
All of the above are reasons why the aggregate-demand curve slopes downward.
In the model of aggregate demand and aggregate supply, the initial impact of an increase in consumer optimism is to
Shift short-run aggregate supply to the right
Shift short-run aggregate supply to the left.
Shift aggregate demand to the right
Shift aggregate demand to the left.
Shift long-run aggregate supply to the left.
Which of the following statements is true regarding the long-run aggregate-supply curve? The long-run aggregate-supply curve
Shifts left when the natural rate of unemployment falls.
Is vertical because an equal change in all prices and wages leaves output unaffected.
Is positively sloped because price expectations and wages tend to be fixed in the long run.
Shifts right when the government raises the minimum wage.
According to the wealth effect, aggregate demand slopes downward (negatively) because
Lower prices increase the value of money holdings and consumer spending increases.
Lower prices decrease the value of money holdings and consumer spending decreases.
Lower prices reduce money holdings, increase lending, interest rates fall, and investment spending increases.
Lower prices increase money holdings, decrease lending, interest rates rise, and investment spending falls.
The natural rate of output is the amount of real GDP produced
When there is no unemployment.
When the economy is at the natural rate of investment.
When the economy is at the natural rate of aggregate demand.
When the economy is at the natural rate of unemployment.
Suppose the price level falls. Because of fixed nominal wage contracts, firms become less profitable and they cut back on production. This is a demonstration of the
Sticky-wage theory of the short-run aggregate-supply curve.
Sticky-price theory of the short-run aggregate-supply curve.
Misperceptions theory of the short-run aggregate-supply curve.
Classical dichotomy theory of the short-run aggregate-supply curve.
Suppose the price level falls but suppliers only notice that the price of their particular product has fallen. Thinking there has been a fall in the relative price of their product, they cut back on production. This is a demonstration of the
Sticky-wage theory of the short-run aggregate-supply curve.
Sticky-price theory of the short-run aggregate-supply curve.
Misperceptions theory of the short-run aggregate-supply curve.
Classical dichotomy theory of the short-run aggregate-supply curve.
Suppose the economy is initially in long-run equilibrium. Then suppose there is a reduction in military spending due to the end of the Cold War. According to the model of aggregate demand and aggregate supply, what happens to prices and output in the short run?
Prices rise; output rises.
Prices rise; output falls.
Prices fall; output falls
Prices fall; output rises.
Suppose the economy is initially in long-run equilibrium. Then suppose there is a reduction in military spending due to the end of the Cold War. According to the model of aggregate demand and aggregate supply, what happens to prices and output in the long run?
Prices rise; output is unchanged from its initial value.
Prices fall; output is unchanged from its initial value
Output rises; prices are unchanged from its initial value.
Output falls; prices are unchanged from its initial value.
Output and the price level are unchanged from their initial values.
Suppose the economy is initially in long-run equilibrium. Then suppose there is a drought that destroys much of the wheat crop. According to the model of aggregate demand and aggregate supply, what happens to prices and output in the short run?
Prices rise; output rises
Prices rise; output falls.
Prices fall; output falls.
Prices fall; output rises.
Suppose the economy is initially in long-run equilibrium. Then suppose there is a drought that destroys much of the wheat crop. If policymakers allow the economy to adjust to long-run equilibrium on its own, according to the model of aggregate demand and aggregate supply, un
what happens to prices and output in the long run? a. Prices rise; output is unchanged from its initial value.
b. Prices fall; output is unchanged from its initial value. c. Output rises; prices are unchanged from its initial value.
d. Output falls; prices are unchanged from its initial value. e. Output and the price level are unchanged from their initial values.
Prices rise; output is unchanged from its initial value.
Prices fall; output is unchanged from its initial value.
Output rises; prices are unchanged from its initial value.
Output falls; prices are unchanged from its initial value.
Output and the price level are unchanged from their initial values.
Stagflation occurs when the economy experiences
Falling prices and falling output.
Falling prices and rising output.
Rising prices and rising output
Rising prices and falling output.
Which of the following events shifts the short-run aggregate-supply curve to the right?
a. an increase in government spending on military equipment b. an increase in price expectations
(a drop in oil prices
an increase in government spending on military equipment
an increase in price expectations
a drop in oil prices
a decrease in the money supply
none
According to the model of aggregate supply and aggregate demand, in the long rin, an increase in the money supply should cause
Prices to rise and out put to rise
Prices to fall and out put to fall
Prices to rise and out put to remain unchanged
Prices to fall and out put to remain unchanged
Keynes’s liquidity preference theory of the interest rate suggests that the interest rate is determined by
a. The supply and demand for loanable funds.
The supply and demand for money
c. The supply and demand for labor.
d.Aggregate supply and aggregate demand.
When money demand is expressed in a graph with the interest rate on the vertical axis and the quantity of money on the horizontal axis, an increase in the interest rate
a. Increases the quantity demanded of money.
b. Increases the demand for money.
c. Decreases the quantity demanded of money.
d. Decreases the demand for money.
e. Does none of the above.
When the supply and demand for money are expressed in a graph with the interest rate on the vertical axis and the quantity of money on the horizontal axis, an increase in the price level
Shifts money demand to the right and increases the interest rate.
Shifts money demand to the left and increases the interest rate.
Shifts money demand to the right and decreases the interest rate.
Shifts money demand to the left and decreases the interest rate.
Does none of the above.
For the United States, the most important source of the downward slope of the aggregate-demand curve is
The exchange-rate effect.
The wealth effect.
The fiscal effect.
The interest-rate effect.
None of the above.
In the market for real output, the initial effect of an increase in the money supply is to
Shift aggregate demand to the right.
Shift aggregate demand to the left.
Shift aggregate supply to the right.
Shift aggregate supply to the left.
6. The initial effect of an increase in the money supply is to
Increase the price level.
decrease the price level
Increase the interest rate.
Decrease the interest rate.
7. The long-run effect of an increase in the money supply is to
Increase the price level.
Decrease the price level.
Increase the interest rate.
Decrease the interest rate.
The initial impact of an increase in government spending is to shift
Aggregate supply to the right.
Aggregate supply to the left.
Aggregate demand to the right.
Aggregate demand to the left.
If the marginal propensity to consume (MPC) is 0.75, the value of the multiplier is
a. 0.75.
b. 4.
c. 5.
d. 7.5.
e. None of the above.
0.75
4
5
7.5
None of the above.
An increase in the marginal propensity to consume (MPC)
Raises the value of the multiplier.
Lowers the value of the multiplier.
Has no impact on the value of the multiplier.
Rarely occurs because the MPC is set by congressional legislation.
Suppose a wave of investor and consumer optimism has increased spending so that the current level of output exceeds the long-run natural rate. If policymakers choose to engage in activist stabilization policy, they should
Decrease taxes, which shift aggregate demand to the right.
Decrease taxes, which shift aggregate demand to the left.
Decrease government spending, which shifts aggregate demand to the right.
Decrease government spending, which shifts aggregate demand to the left.
When an increase in government purchases raises incomes, shifts money demand to the right, raises the interest rate, and lowers investment, we have seen a demonstration of
The multiplier effect.
The investment accelerator.
The crowding-out effect.
Supply-side economics.
The liquidity trap.
Which of the following statements regarding taxes is correct?
Most economists believe that, in the short run, the greatest impact of a change in taxes is on aggregate supply, not aggregate demand.
A permanent change in taxes has a greater effect on aggregate demand than a temporary change in taxes.
An increase in taxes shifts the aggregate-demand curve to the right.
A decrease in taxes shifts the aggregate-supply curve to the left.
Suppose the government increases its purchases by $16 billion. If the multiplier effect exceeds the crowding-out effect, then
The aggregate-supply curve shifts to the right by more than $16 billion.
The aggregate-supply curve shifts to the left by more than $16 billion.
The aggregate-demand curve shifts to the right by more than $16 billion.
The aggregate-demand curve shifts to the left by more than $16 billion.
When an increase in government purchases increases the income of some people, and those people spend some of that increase in income on additional consumer goods, we have seen a demonstration of
The multiplier effect.
The investment accelerator.
The crowding-out effects.
Supply-side economics.
None of the above.
Which of the following best describes how an increase in the money supply shifts aggregate demand?
The money supply shifts right, the interest rate rises, investment decreases, and aggregate demand shifts left.
The money supply shifts right, the interest rate falls, investment increases, and aggregate demand shifts right.
The money supply shifts right, prices rise, spending fall, and aggregate demand shifts left.
The money supply shifts right, prices fall, spending increases, and aggregate demand shifts right.
