The interest rate effect suggests that the negative slope of the aggregate demand curve results at least in part because changes in the price level affect:
a. domestic purchases of foreign goods
b. the holdings of money by households and firms.
c. the real purchasing power of assets.
d. the level of income.
b
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Based on the figure below. Starting from long-run equilibrium at point C, a tax cut that increases aggregate demand from AD to AD1 will lead to a short-run equilibrium at point ________ and eventually to a long-run equilibrium at point ________, if left to self-correcting tendencies. 
A. D; C B. B; C C. B; A D. D; B
Refer to Figure 8A.1. Capital deepening occurs as long as
A) total saving exceeds depreciation. B) the level of Y is increasing. C) total saving and depreciation are equal. D) depreciation exceeds total saving.
A model that is composed of many equations that show the channels through which monetary and fiscal policy affect aggregate output and spending is called a
A) reduced-form model. B) median-voter model. C) informed median-voter model. D) structural model.
The desire to smooth consumption is reflected in
A) the consumer's budget constraint. B) the curvature in a consumer's indifference curves. C) choice between present and future. D) the production possibilities frontier.