1.  All else constant, if central bank desires to slow the pace at which economy is expanding, it must raise interest rates.

a. True

b. False

2.  All else constant, reduce in the level of economic activity in foreign countries could be anticipated to have an unfavourable effect on domestic economy.

a. True

b. False

3.  According to circular flow model, the level of income in economy is independent of tax and spending policies of federal government.

a. True

b. False

4.  If government spending exceeds the amount of taxes gathered from businesses and households, the government simply finances the difference by printing more money.

a. True

b. False

5.  When market price is less than the equilibrium price, the surplus will form. This will effect on the quantity demanded to reduce and quantity supplied to increase till equilibrium is reestablished.

a. True

b. False

6.  Suppose the government decides to oblige a new tax on sellers of gasoline, i.e., sellers are needed to pay the government an extra fee for each gallon of gas they sell. In market for gas, this would have the effect of causing the decrease in supply of gas.

a. True

b. False