True/False (1 point each) Indicate whether the statement is true or false. 1. Th
ID: 1186845 • Letter: T
Question
True/False (1 point each)
Indicate whether the statement is true or false.
1. The real interest rate is calculated by factoring out inflation from the nominal interest rate.
2. Under the expenditure approach to GDP accounting, government purchases of goods and services include welfare payments.
3. If the overall price level decreases, then the aggregate demand curve will shift to the right.
4. Higher interest rates will tend to reduce aggregate demand, other things being equal.
5. The real wealth and the real interest rate effects are both causes of the downward slope of the aggregate demand curve.
6. If the price level in the United States increases, domestic goods will become relatively more expensive than foreign goods. Consumers will import more and reduce the quantity of domestic goods and services they buy.
7. When the price level falls, households and firms reduce their holdings of money, and shift their money into interest earning assets, which will increase the supply of loanable funds, leading to a lower interest rate and an increase in borrowing and an increase in RGDP demanded.
8. The SRAS curve is vertical at the natural level of real output.
9. Increases in government regulations can make it more costly for producers, and the increase in production costs results in a leftward shift of the short-run aggregate supply curve.
10. Expenditure multiplier only considers the impact of consumption changes on aggregate expenditures.
11. The value of the balanced-budget multiplier depends on the marginal propensity to consume.
12. If inflation was the most significant issue in the economy, an appropriate fiscal policy response would be to decrease taxation.
13. If the government cuts taxes, total spending will fall and AD will shift to the left.
14. In the United States, monetary policy is the responsibility of the Federal Reserve Board of Governors and the Federal Open Market Committee.
15. The money supply is very sensitive to changes in the rate of interest.
Explanation / Answer
1.T
2.F
3.F
4.T
5.T
6.T
7.T
8.F
9.T
10.T
11. T
12. T
13. T
14. T
15.T
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