If the price of inputs falls and the government deficit rises:
a. Aggregate demand and aggregate supply rise.
b. Aggregate demand rises, but aggregate supply does not change.
c. Aggregate demand falls, and aggregate supply rises.
d. Aggregate demand rises, and aggregate supply falls.
e. None of the above.
Question 2 - Assume that business investment spending rises, and the increase is funded by greater borrowing in the capital markets. If the nation has low mobility international capital markets and a fixed exchange rate system, what happens to the GDP Price Index and reserves account in the context of the Three-Sector-Model?
a. The GDP Price Index rises and reserves account becomes more positive (or less negative).
b. The GDP Price Index falls and reserves account remains the same.
c. The GDP Price Index and reserves account remain the same.
d. The GDP Price Index rises and reserves account remains the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
Question 3 - If the price of inputs falls and the government deficit rises:
a. Aggregate demand rises, and aggregate supply falls.
b. Aggregate demand rises, but aggregate supply does not change.
c. Aggregate demand falls, and aggregate supply rises.
d. Aggregate demand and aggregate supply rise.
Question 4 - Assume that business investment spending rises, and the increase is funded by greater borrowing in the capital markets. If the nation has low mobility international capital markets and a fixed exchange rate system, what happens to the GDP Price Index and net nonreserve international borrowing/lending balance in the context of the Three-Sector-Model?
a. The GDP Price Index rises and net nonreserve international borrowing/lending balance becomes more positive (or less negative).
b. The GDP Price Index rises and net nonreserve international borrowing/lending balance becomes more negative (or less positive).
c. The GDP Price Index falls and net nonreserve international borrowing/lending balance becomes more positive (or less negative).
d. The GDP Price Index and net nonreserve international borrowing/lending balance remain the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
Question 5 - If expected future prices rise, this causes the nation's current:
a. Aggregate demand to fall, the average price level to fall, and real GDP to rise.
b. Aggregate supply to rise, the average price level to rise, and real GDP to rise.
c. Aggregate demand to rise, the average price level to rise, and real GDP to rise.
d. Aggregate supply to fall, the average price level to rise, and real GDP to fall.
e. Aggregate demand to fall, the average price level to fall, and real GDP to fall.
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