Consider a Simple Macro-Model with Demand-Determined Output

question 14

Multiple Choice

Consider a simple macro-model with demand-determined output.An exogenous increase in the domestic price level will ________ the real value of the private sector's wealth,which leads to ________ in autonomous consumption and thus ________ shift in the AE function.

• A)increase; a decrease; a downward
• B)increase; an increase; a downward
• C)increase; an increase; an upward
• D)reduce; a decrease; a downward
• E)reduce; an increase; an upward

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Definitions:

Bond Premium Amortization

The gradual expense recognition over time of the premium paid above the par value for a bond.

Interest Expense

The cost incurred by an entity for borrowed funds, reflected as a charge against earnings.

Interest Rate

The Interest Rate is the proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the loan outstanding.

Straight-Line Amortization

A method of calculating the depreciation of an asset or the repayment of a loan in equal installments over a specified period of time.