Question

1. In a typical boom, consumption _____. Investment moves in the same direction but proportionately _____.

Question options:

	rise, more
	rises, less
	falls, more
	falls, less

Question 3

0 / 1 point

3. If a technological advance at credit card companies makes stores start accepting more credit payments, the demand for money will _____. If the money supply is held constant, the aggregate demand curve will shift to the _____.

Question options:

	increase, right
	increase, left
	decrease, right
	decrease, left

Question 5

0 / 1 point

6. If the Fed responds to a positive supply shock by reducing the money supply, it will

Question options:

	stabilize aggregate demand at its previous level
	make the resulting recession deeper than it otherwise would have been
	keep the economy closer to its natural levels of output and employment
	allow the price level to return to the level that prevailed before the shock

Answer 1

1. rises, less

During a boom, the rate of increase in consumption is greater than the rate of increase in investments, as there becomes a sense of scepticism among the population which starts practing prudence.

3. decrease, left

The demand for money will decrease, as more people will engage in buying goods and services on credit. A decrease in demand is reapresent by the leftward shift if the demand curve.

6.make the resulting recession deeper than it otherwise would have been

The governemnt can use fiscal policy of increasing taxes or reducing expeditures. This will cause a recession.

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