1. Suppose the demand for meals at a medium-priced restaurant is elastic. If the management of the restaurant is considering raising prices, it can expect a relatively:

small fall in demand.

small fall in quantity demanded.

large fall in quantity demanded.

large fall in demand.

2. Which of the folllowing properly describes the exchange rate effect that helps explain the slope of the aggregate demand curve?

A. As the money supply increases, the interest rate rises, so spending falls.

B. As the price level increases, the interest rate falls, so spending rises.

C. As the price level increases, the interest rate rises, so spending falls.

D. As the money supply increases, the interest rate falls, so spending rises.