14) Globalization refers to
A) the process of establishing a common world currency.
B) the willingness of individuals within a given country to share knowledge.
C) the process of countries becoming more open to foreign trade and investment.
D) the reduction in growth rates of real GDP per capita as a result of trade with foreign
countries.
15) According to a study by economists Raymond Fisman and Edward Miguel, as the level of corruption in a country increases,
A) so does the number of parking violations by the country's United Nations delegates.
B) so does the size of the country's population.
C) the levels of foreign direct investment and foreign portfolio investment decrease.
D) the levels of real GDP per capita and real income per capita increase.
16) Which of the following best describes the "wealth effect"?
A) When the price level falls, the real value of household wealth falls.
B) When the price level falls, the nominal value of household wealth falls.
C) When the price level falls, the nominal value of household wealth rises.
D) When the price level falls, the real value of household wealth rises.
17) The "interest rate effect" can be described as an increase in the price level that raises the interest 17) rate and chokes off
A) government spending.
B) government spending and unplanned investment.
C) investment and consumption spending.
D) net exports.
18) Which of the following is one explanation as to why the aggregate demand curve slopes downward?
A) Decreases in the price level raise the interest rate and increase consumer spending.
B) Decreases in the price level raise the interest rate and increase investment spending.
C) Decreases in the U.S. price level relative to the price level in other country's lower net exports.
D) Decreases in the price level to raise real wealth and increase consumer spending.
19) Higher personal income taxes
A) increase in aggregate demand.
B) increase disposable income.
C) decrease aggregate demand.
D) both B and C
20) If the U.S. dollar decreases in value relative to other currencies, how does this affect the aggregate demand curve?
A) This will move the economy up along a stationary aggregate demand curve.
B) This will move the economy down along a stationary aggregate demand curve.
C) This will shift the aggregate demand curve to the left.
D) This will shift the aggregate demand curve to the right.
21) How do lower taxes affect aggregate demand?
A) They increase disposable income, consumption, and aggregate demand.
B) They reduce disposable income, consumption, and aggregate demand.
C) they increase corporate investment and aggregate demand.
D) They increase aggregate supply and thus increase aggregate demand as well.
