Demand and Aggregate Supply
- 1. Aggregate Demand increases as the price level
- A. consumers are more willing to buy a good as its price
- B. as price falls, real income increases and consumption
increases which increases aggregate demand.
- C. as price falls, demand for nominal money balances
falls, the interest rate falls which causes investment
and aggregate demand to increase.
- D. as price falls, demand for nominal money balances
increases, the interest rate falls which causes
investment and aggregate demand to increase.
- 2. Which of the following would not cause a
decrease in Aggregate Demand?
- A. raising the reserve requirement.
- B. consumption patterns changing such that autonomous
- C. the FED selling government bonds.
- D. a decrease in government spending on goods and
- E. a rise in the discount rate.
- 3. An increase in net exports would eventually cause all
of the following to happen except:
- A. increase equilibrium output (assuming aggregate supply
is upward sloping.)
- B. shift Aggregate Demand to the right.
- C. shift the demand for money curve to the right.
- D. increase the interest rate.
- E. increase the money supply.
- 4. If Aggregate Demand exceeds Aggregate Supply at a full
employment level of output, there will be:
- A. unemployment.
- B. inflation.
- C. a federal budget deficit.
- D. stagflation.
- 5. A technological change that permanently lowered energy
costs would cause the:
- A. AD curve to shift to the right.
- B. AD curve to shift to the left.
- C. price level to fall while output grew.
- D. AS curve to shift to the right.
- E. AS curve to shift to the left.
- 6. Other things equal, an increase in the money supply
- A. cause a movement along a given AD curve.
- B. shift the AD curve to the right.
- C. shift the AD curve to the left.
- D. shift the AS curve to the right.
- E. cause a movement along a given AS curve.
- 7. All else equal, a decrease in the supply of labor will
- A. decreases in AS which will increase the price level
- B. increases in AS which will decrease the price level
- C. decreases in AS which will increase the price level
and decrease output.
- D. decreases in AS which will decrease the price level
- E. increases in AS which will decrease the price level
and increase output.
- 8. Consider the following three statements:
- I. Most recessions occur when AS grows faster than AD so
that there is deflationary pressure in the economy.
- II. Stagflation tends to occur when AS decreases.
- III. AD is negatively sloped because expansions of
government spending crowd out private spending.
- A. All three statements are true.
- B. All three statements are false.
- C. II is true while I and III are false.
- D. I is false while II and III are true.
- E. III is true while I and II are false.