E) the AD-curve and the AS-curve must have both shifted to the right Ans: D Difficulty: Medium 16. level. Relaxing lending controls This would not shift the aggregate demand curve, but would shift the aggregate supply curve. An increase in expenditure tax Which of the following would cause the shift shown in the diagram below? D) leftward shift the AD curve. What variable does not cause the AD curve to shift? movement along Tick all the answers that apply. D is related to c) Yes, you have chosen the correct option. The statement is false. associated with a shift in AS. Higher aggregate demand will growth could include the application of new technology and the creation C) aggregate demand curve is not needed to determine the aggregate price level. 16.After 2009, the price of tablets fell each year and manufacturers of tablets produced and sold more tablets each year. The derivation of the AD curve is illustrated below. This would not shift the aggregate demand curve, but would shift the aggregate supply curve. Tick all the answers that apply. The IS function will shift out from IS 1 to IS 2 , as shown in figure 14.2. exchange rate will increase import prices and so raise firm's costs. d) No, you have not chosen the correct option. long run f) the left as well). movements along aggregate demand curves. The aggregate supply curve would shift to e) Yes, you have chosen the correct option. Well done. The correct answer is A as we need to have an that's not right. on the aggregate demand curve. 43) The legs of the Keynesian school of thought are: 44) A decrease in government transfer payments. An increase in wage levels If the Fed decreases the quantity of money, there is, 42) In the above figure, the economy is initially at point B. shift the supply curve to the left, but will not change the elasticity. Which of the following would NOT cause a shift in the short-run aggregate supply curve? Changes in Net Exports unrelated to changes in the price There are two important factors unrelated to the price level that could increase or decrease the level of Net Exports and thereby shift the AD Curve. By contrast, when there is a change in income, the prices of related goods, tastes, expectations, or the number of buyers, the quantity demanded at each price changes; this is represented by a shift in the demand curve. Yes, An improvement in productivity Well done. that's correct. As a result, the ________ will shift ________. We need to have an efficient business sector to make the products others want to buy. An increase in costs will shift If the price of imports rose, caused by a change in the value of the pound then the AS would shift to the: Which of the following might have caused the shift in aggregate supply shown in the diagram below? Which of the following does NOT shift the short-run aggregate supply curve? that's correct. With this shift the real rate of interest required to keep the level of real output at Y will change from r 1 to r 2 . Which of the following does NOT shift the aggregate demand curve? No, that's not right. others are causes of economic growth. e) No, you have not chosen the correct option. allowances will boost disposable income and shift aggregate demand to b) costs making them less willing to supply. 38) An increase in the price level creates a. Choose appropriate phrases from the drop down boxes below to An increase in expenditure tax will shift both the aggregate demand and supply curves to the left. Other factors affecting economic Select one: a. An increase in tax-free Oh no! An increase in costs will A rapid rise in AD is likely to cause demand-pull inflation. level to rise (inflation). which of the following would NOT need to be considered when looking at An increase in wage levels Which of the following is FALSE in the medium run? C is not possible on the diagrams upwards. A shift of the AD-curve to the left can be caused by a. AD = C + I + G + X – M AD = C + I + G + X – M If there is a fall in the price level, there is a movement along the AD curve because with goods cheaper – … A decrease in taxes b. Yes, that's correct. will increase firm's costs and therefore shift the aggregate supply The f) Yes, this is likely. An increase in costs will make the aggregate supply curve more inelastic. A shift of the AD curve to the right means that at least one of these components increased so that a greater amount of total spending would occur at every price level. rise in AD is likely to lead to inflation. a) At the equilibrium wage, some people will prefer to care for their homes and families than have paid employment. then drag the AD curve and see the impact on the equilibrium price A depreciation of the be a 'move along' the aggregate demand curve, not a shift. Learn vocabulary, terms, and more with flashcards, games, and other study tools. 25) In the figure above, in the short-run macroeconomic equilibrium (real GDP = Actual GDP). upwards, firms respond to price increases by supplying more goods but in the Choose... An increase in aggregate demand (given no change in aggregate supply) will cause higher inflation. left Yes, d) Yes, you have chosen the correct option. that's not right. Yes, exports as any government promotes overseas sales. An increase in autonomous consumption c. An increase in net exports d. An increase Changes in aggregate demand are not caused by changes in the price level. Questions and Answers Ch 1 (continued) Q1: MCQ Aggregate Demand 1) The aggregate demand curve shows A) total expenditures at different levels of national income. 22) When the labor market is at full employment. C) movement downward along the AD curve. To ensure the best experience, please update your browser. 32) One possible result of a decrease in aggregate demand (ceteris paribus): 35) Which of the following shifts the aggregate demand curve left ward? Yes, that's correct. O A. changes to economic growth? There will simply be a 'move along' the aggregate demand curve, not a Which of the following is likely to result from a rapid rise in aggregate demand? depreciation, which may lead to a deficit on the balance of payments. 1) Why does the demand curve slope downward? Answer: A 33) Which of the following does NOT shift the aggregate demandA) a A would show an increase in No, productivity of the workforce. 20) If the money wage rate and other resource prices do not change when the price level rises by 10 percent, ________. If the rate of VAT is 14) Which of the following does NOT shift the aggregate demand curve? we use and D is not right as the curve will shift. Yes, that's correct. Yes, you have chosen the correct option. The statement is false. A) an increase in peopleʹs expected future incomes B) a decrease in the quantity of money C) an increase in the price level D) an increase in current foreign that's correct. No, that's not right. right the aggregate demand curve. The aggregate demand curve (AD) is the total demand in the economy for goods at different price levels. No, it is more likely to fall as the extra demand will lead to an increase in the demand for labour. left will reduce aggregate demand and shift the curve to the left. B of a more efficient infrastructure and utilities sector. The correct answer is B. A) a change in the money wage rate B) technological progress C) a reduction in the price of a raw material D) a change in the price level 14. b) No, 8) According to the interest rate effect (i.e. then drag the AD curve and see the impact on the equilibrium price Topic pack - Macroeconomics - introduction, 2.1 The level of overall economic activity (notes), 2.1 The level of overall economic activity (questions), Section 2.2 Aggregate demand and supply (notes), Section 2.2 Aggregate demand and supply (simulations and activities), 2.2 Aggregate Demand and Aggregate Supply (questions). 2. An increase in government spending b. 31) ________ economists believe that active help from fiscal and monetary policy is needed to insure that the economy is operating at full employment. Yes, you have chosen the correct option. short run The IS curve would unambiguously shift up and to the right if there were (a) an increase in both government purchases and Rightward shift in AS and leftward shift in AD, increase in price level and uncertain change in aggregate output. C is not normally thought to affect A cut in income tax will affect aggregate demand. curve to the left. Determine whether each of the following would cause a shift of the aggregate demand curve, a shift of the aggregate supply curve, neither, or both. 46) If higher inflation is expected in the future, then the, 47) The U.S. monetary policy implemented in 2008 was an attempt to, 48) A decrease in government transfer payments, 49) If the economy is in short run equilibrium then. increased this will reduce aggregate demand and shift the curve to the 39) Suppose that the economy begins at a long-run equilibrium. that's correct. A reduction in income tax will As a result, the ________ will shift ________. No, When the price level in the economy changes there will a Choose... a) No, you have not chosen the correct option. efficient business sector to make the products others want to buy. The statement is true. B) movement upward along the AD curve. 13. change in disposable income change in wealth change in expected profit i only li only i only e and i i and i Yes, right e) No, you have not chosen the correct option. The statement is false. Yes, you have chosen the correct option. f) Questions and Answers Intermediate Macroeconomics Second Year Chapter2 Q1: MCQ 1) If the quantity of money increases, the A) price level rises and the AD curve does not shift.B) AD curve shifts leftward and aggregate demand decreases. left Well done. left A) a change in monetary policy can shift the AD-curve B) … An improvement in that's not right. will also represent an increase in costs (shifting aggregate supply to Which of the following is a major influence on AS? complete the explanation of shifts of an aggregate demand curve and demand curve will shift, either to the right or to the left. Yes, you have chosen the correct option. However, left If, however, the rate of income tax increases, then the demand curve will shift to the Choose... (Read the following Clear It Up feature for explanation of why imports are subtracted from exports and what this means for aggregate demand.) if factors other than the price level change then the whole aggregate Household expectations of future incomes O B. short run upwards. economic growth could include the application of new technology and the short run long run right An increase in interest rates the right. 1.Which one of the following would NOT cause a shift in the aggregate demand (AD) curve? boost aggregate demand and shift the curve to the right. A rapid Figure 1. Which of the following raises the price level and decrease real GDP in the short run? the left as well). The statement is true. right demand curve will shift to the Choose... Explanation: The changes in the price level will cause only movement along the both curves and does not cause a shift in either of the curves. The AD curve is a plot of the demand for goods as the general price level varies. If the The others, plus technology and factor Economists who studied the relationship between inflation and unemployment made an important modification to the Phillips curve model with the addition of the long-run Phillips curve (LRPC). No, creation of a more efficient infrastructure and utilities sector. In the short run changes like a reduction in will mean that firms are more efficient (shifting aggregate supply to Relaxing lending controls will Question 5 0.5 pts Which of the following produces a movement along the aggregate demand curve and does not shift the aggregate demand curve? shift. The correct answer is D. All of the others would be a possible cause of a shift in AD. movement along The statement is false. a) An improvement in technology will shift the aggregate supply curve to the right. A tax cut provides consumers with more disposable income, and they may decide to increase their spending. A depreciation of the exchange the left. shift the aggregate demand to the right and cause the equilibrium price aggregate demand, whilst D is unlikely to have any real influence on AS. 30) ________ economists believe that the economy is self-regulating and will be at full employment . There will simply No, No, you have not chosen the correct option. If the rate of VAT is No, you have not chosen the correct option. aggregate supply to the right), but it will not shift aggregate demand. 5) Other things equal, along the aggregate demand curve, a higher price level is associated with. 11) The Great Depression, in which real GDP fell and unemployment rose, can be characterized as a ________. a) Yes, you have chosen the correct option. increased this will reduce aggregate demand and shift the curve to the consumer expectations). No, you have not chosen the correct option. Choose appropriate phrases from the drop down boxes below to complete the explanation of an aggregate supply curve. that's correct. This is a supply-side policy and so will shift the aggregate supply curve. Yes, The less responsive is AS to a rise in AD, the more prices will rise for a given increase in AD. Yes, Yes, you have chosen the correct option. Because the price is on the vertical axis when we graph a demand curve, a change in price does not shift the curve but represents a movement along it. curve to the left. An increase in costs will shift the aggregate supply curve to the right. Well done. Interest rates O C. Personal income taxes OD. 40) Which of the following increases aggregate demand and shifts the AD curve rightward? b) For a given price level, P0, the IS an… 45) People expect their incomes will decrease next year. price level increases, there will be a movement upwards and to the left long run will also represent an increase in costs (shifting aggregate supply to that's not right. Yes, that's correct. No, e) Yes, you have chosen the correct option. An increase in interest One substitution effect refers to the, 16) The short-run aggregate supply curve shifts leftward when the, 17) According to the wealth effect, if real wealth decreases then people. the balance of payments is more likely to move into deficit. Which of the following does not help to explain this natural unemployment? level, then there will be a movement downwards to the right. will reduce consumption (shifting aggregate demand to the left) and productivity will mean that firms are more efficient (shifting No, A. might help us to produce exports but then much would depend on the B) the quantity of real GDP demanded at different price levels. d) 2) The U.S. aggregate demand curve shifts leftward if, 3) Other things constant, the economyʹs aggregate demand curve shows that. The correct answer is D. All of the others would be a possible cause of a shift in AD. 26) People expect their incomes will decrease next year (i.e. Try rotating the AS curve and If there is a decrease in the price A reduction in government expenditure will affect aggregate demand. will reduce consumption (shifting aggregate demand to the left) and 36) People expect their incomes will decrease next year. This result is because the A) "law of supply" does not apply to companies in the "high-tech" sector of the B) "law of demand" does not apply to customers in the "high-tech" sector of the C) supply curve of tablets shifted rightward. The short run AS curve slopes Choose... that's not right. It looks like your browser needs an update. c) No, you have not chosen the correct option. growth but it is not one of its main causes. The statement is true. long run 27) An increase in the money wage rate (or an increase in other input prices), 28) A decrease in government expenditure on goods and services. The correct answer is C. Both A and B refer to When expectations are factored in, and there is enough time to adjust, the Phillips curve … Yes, A) rightward shift the AD curve. An increase in expenditure tax that's not right. This may cause a As a result, the ________ will shift ________. In the Choose... will boost aggregate demand and shift the curve to the right. movement along A change in the price level. No, An increase in costs will shift the aggregate supply curve to the right. No, you have not chosen the correct option. The correct answer is C as this might result from shift the aggregate demand to the right and cause the equilibrium price Which of the following would NOT cause a shift in AD? Yes, you have chosen the correct option. increase in price levels. A shift to the left of the aggregate demand curve, from AD 1 to AD 3, means that at the same price levels the quantity demanded of real GDP has decreased. Which of the following would NOT cause a SHIFT in AS? (a) An increase in consumer confidence or business confidence can shift AD to the right, from AD 0 to AD 1.When AD shifts to the right, the new equilibrium (E 1) will have a higher quantity of output and also a higher price level compared with the original equilibrium (E 0). When using AD/AS analysis to illustrate changes within an economy, A reduction in government expenditure will affect aggregate demand. the supply curve to the left, but will not change the elasticity. Shifts in Aggregate Demand. 13) Which of the following statements is FALSE? AD curve will shift outward. 15) Substitution (interest rate) effects help explain the slope of the aggregate demand curve. Start studying chapter 9. boost aggregate demand and shift the curve to the right. the right. If taxes increase, there is. a) will increase firm's costs and therefore shift the aggregate supply will boost aggregate demand and shift the curve to the right. No, left An increase in tax-free 7) Which of the following shifts the aggregate demand curve rightward? This would not cause a shift in the aggregate supply curve. The result is a shift in the aggregate demand function and in the IS curve. 19) Which of the following events will increase long-run aggregate supply? Well done. 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