Economics Homework Help

A. The interest-rate effect suggests that an increase in the price level will increase the demand for money, increase interest rates, and decrease consumption and investment spending. B. The interest-rate effect suggests that an increase in the price level will decrease the demand for money, reduce interest rates, and increase consumption and investment spending. C. The interest-rate effect suggests that an increase in the price level will increase the demand for money, reduce interest rates, and decrease consumption and investment spending. D. The interest-rate effect suggests that a decrease in the supply of money will increase interest rates and reduce interest-sensitive consumption and investment spending.

8. A reasonable investor will make an investment if the expected rate of return equals

A. his or her marginal propensity to save. B. the real interest rate. C. the nominal interest rate. D. the inflation rate.

9. A high multiplier means that the initial change in spending is _______ relative to the change in real GDP.

A. high B. approximately equal C. low D. unrelated

10. At equilibrium GDP

A. inflation equals total expenditures. B. the increase in aggregate expenditure is equivalent to the real interest rate. C. the total quantity of goods produced exceeds net exports. D. the total quantity of goods produced equals the total quantity of goods purchased.