Question

2. There is a negative demand shock when

A) interest rates fall.

B) consumers become more optimistic.

C) government reduces net taxes.

D) interest rates rise.

E) government spending increases.

3. The aggregate demand (AD) curve is the relationship between the quantity of real GDP that macroeconomic players plan to demand and the

A) quantity of real GDP supplied.

B) exchange rate.

C) inflation rate.

D) unemployment rate.

E) price level.

4. In the loanable funds market,

A) when interest rates are higher, businesses borrow more money for investment.

B) when interest rates are higher, consumers borrow more money for mortgages.

C) an increase in consumer savings causes the interest rate to rise.

D) savers are the demanders, and borrowers are the suppliers.

E) none of the above are true.

5. When there is economic growth with rising living standards,

A) business investment increases both LAS and SAS.

B) business investment increases the quantity and quality of inputs.

C) increased employment in new factories increases income, so AD increases.

D) potential GDP is greater in the new long-run macroeconomic equilibrium.

E) all of the above are true.

Answer 1

2. The correct answer is D. Interest rates rises.

Because when interest rate rises the investment and consumption reduces due to which it causes sudden decrease in the quantity demand for goods and services, it causes negative Demand shock.

3. The correct answer is E. Price level

Because aggregate Demand as total amount of money exchanged for goods and services at specific price level.

4 The correct answer is E. None of the above are true.

Because at higher interest rate business borrow less money, the saver are the supplier and borrower are demander. And when increase in interest rate attractive and encourage more saving and cut in interest rate discouraged savings.

5. The correct answer is E. All the above.

Because economic growth with rising living standard causes increase in investment, increase in quantity and quality and increase in potential GDP. It means Growth in GDP expands over all size of the economy and strenthen fiscal condition.