7. The Nominal Rate of Interest contains: a. the expected rate of inflation b. t

Question

7. The Nominal Rate of Interest contains: a. the expected rate of inflation b. the real interest rate c. the federal funds rate d. the discount rate e. both a and b f. both c and d 8. If government spending suddenly increases, the aggregate demand curve should: a. shift to the left b. shift to the right c. remain constant d. become vertical e. become horizontal f. None of the above 9. Cost push inflation can result from: a. an economy operating at full employment b. the renegotiation of union contracts c. a decrease in the money supply d. a decrease in the supply of skilled workers e. an increase in the immigration of unskilled workers f. a, b and d

Explanation / Answer

Ans7) E is the correct option. Both a and b. The nominal rate of interest is the sum of real interest rate and the inflation rate.

Ans8) B is the correct option. Shifts to the right. Government spending is the component of aggregate demand. So if government spending increases the aggregate demand increases and shifts to the right.

Ans9) F the correct option. a,b and d. Cost-push inflation is a kind of inflation which is caused by increase in the cost of important goods or services where there is no suitable alternative available

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