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Multiple Choice Quiz Chapter 1: ? 1 .?????? Interest rates are important because:? ??? high interest rates discourage consumer spending. ??? high interest rates encourage individuals to save more. ??? high interest rates cause corporations to postpone building new plants which would generate more jobs. ??? ●All the above are correct ? 2 .?????? Looking at interest rates over time, generally,? ??? short term interest rates usually do not change when long term interest rates rise. ??? ●short term interest rates usually rise when long term interest rates rise. ??? short term interest rates usually rise when long term interest rates fall. ??? None of the above are correct. ? 3 .?????? Over time, generally, the value of stocks has:? ??? Steadily fallen. ??? Increased smoothly. ??? Remained constant. ??? ●Fluctuated substantially ? 4 .?????? Before periods of recession,? ??? money supply growth rates tend to rise. ??? ●money supply growth rates always fall. ??? money supply growth rates tend to fall. ??? money supply growth rates sometimes rise and sometimes fall. ? 5 .?????? Which of the following captures the historic relationship between money and the overall price level?? ??? Prices decrease and the money supply has increased over time. ??? Prices increase but the money supply has remained constant over time. ??? ●Both tend to increase together over time. ??? Prices decrease and the money supply has been relatively constant over time. ? 6 .?????? Countries with low inflation tend to have:? ??? high money growth ??? no money growth ??? highly variable money growth ??? ●low money growth ? 7 .?????? Given the price level Pt, the inflation rate is calculated as:? ??? Pt/Pt-1 ??? ●(Pt – Pt-1)/Pt-1 ??? (Pt – Pt-1)/Pt ??? Pt – Pt-1 ? 8 .?????? The relationship between real and nominal GDP is that:? ??? both Real and Nominal GDP use current prices. ??? both Real and Nominal GDP use base year prices. ??? Real GDP is evaluated with curren