Other factors affecting a) Yes, you have chosen the correct option. 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. might help us to produce exports but then much would depend on the When expectations are factored in, and there is enough time to adjust, the Phillips curve … a) No, you have not chosen the correct option. An increase in wage levels No, Which of the following does NOT shift the aggregate demand curve? Yes, 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. c) Yes, you have chosen the correct option. O A. upwards, firms respond to price increases by supplying more goods but in the Choose... No, you have not chosen the correct option. Yes, you have chosen the correct option. If, however, the rate of income tax increases, then the demand curve will shift to the Choose... d) boost aggregate demand and shift the curve to the right. A. change in the price level B. depreciation of the international value of the dollar C. decline in the interest rate at each possible price level D. an increase in left d) No, you have not 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. No, Which of the following is likely to result from a rapid rise in aggregate demand? Answer: A 33) Which of the following does NOT shift the aggregate demandA) a e) Yes, you have chosen the correct option. Which of the following would NOT cause a shift in the short-run aggregate supply curve? consumer expectations). No, that's not right. the left. Higher aggregate demand will If there is a decrease in the price short run This would not shift the aggregate demand curve, but would shift the aggregate supply curve. Which of the following does not help to explain this natural unemployment? Shifts in Aggregate Demand. Yes, that's correct. This would not shift the aggregate demand curve, but would shift the aggregate supply curve. No, 43) The legs of the Keynesian school of thought are: 44) A decrease in government transfer payments. Choose appropriate phrases from the drop down boxes below to complete the explanation of an aggregate supply curve. curve to the left. Other factors affecting economic An improvement in a) Choose the correct answer below. left. level, then there will be a movement downwards to the right. An increase in interest rates D is related to 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. AS whereas we are analysing a fall. right. example, if there is a reduction in income tax, then the aggregate Yes, that's correct. movement along An increase in tax-free rate will increase import prices and so raise firm's costs. that's correct. The aggregate demand for goods and services is determined at the intersection of the IS and LM curves independent of the aggregate supply of goods and services (implicitly, when deriving the AD curve it is assumed that whatever is demanded can be supplied by the economy). 39) Suppose that the economy begins at a long-run equilibrium. Yes, change in disposable income change in wealth change in expected profit i only li only i only e and i i and i b) others are causes of economic growth. upwards whereas a reduction in wage costs would shift the aggregate supply curve to the Choose... 1.Which one of the following would NOT cause a shift in the aggregate demand (AD) curve? 13) Which of the following statements is FALSE? Changes in aggregate demand are not caused by changes in the price level. that's not right. then drag the AD curve and see the impact on the equilibrium price allowances will boost disposable income and shift aggregate demand to The aggregate demand curve (AD) is the total demand in the economy for goods at different price levels. Learn vocabulary, terms, and more with flashcards, games, and other study tools. c) No, you have not chosen the correct option. 16.After 2009, the price of tablets fell each year and manufacturers of tablets produced and sold more tablets each year. 2. 14) Which of the following does NOT shift the aggregate demand curve? The price of imports has risen and this would raise firm's The short run AS curve slopes Choose... The statement is true. If taxes increase, there is. An improvement in technology will shift the aggregate supply curve to the right. B. An increase in costs will shift the aggregate supply curve to the right. long run E) amount of potential GDP increases when the price level rises. 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, you have chosen the correct option. will mean that firms are more efficient (shifting aggregate supply to Choose appropriate phrases from the drop down boxes below to that's correct. This is a supply-side policy and so will shift the aggregate supply curve. increased this will reduce aggregate demand and shift the curve to the Which of the following is FALSE in the medium run? No, it is more likely to fall as the extra demand will lead to an increase in the demand for labour. An increase in costs will shift the aggregate supply curve to the right. long run No, you have not chosen the correct option. Well done. C) aggregate demand curve is not needed to determine the aggregate price level. When the price level in the economy changes there will a Choose... Which of the following would NOT cause a shift in AD? left D) leftward shift the AD curve. No, 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). A reduction in government expenditure will affect aggregate demand. will reduce consumption (shifting aggregate demand to the left) and will reduce aggregate demand and shift the curve to the left. D) price level does not affect the quantity of real GDP supplied. It looks like your browser needs an update. B 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. right The AD curve is a plot of the demand for goods as the general price level varies. This is called a positive demand shock . d) left upwards. Figure 1. A cut in income tax will affect aggregate demand. A. This might result from greater economic Which one of the following would not shift the aggregate demand curve? No, A) a change in monetary policy can shift the AD-curve B) … aggregate supply to the right), but it will not shift aggregate demand. No, right Yes, you have chosen the correct option. The statement is false. A depreciation of the exchange then drag the AD curve and see the impact on the equilibrium price 5) Other things equal, along the aggregate demand curve, a higher price level is associated with. Yes, you have chosen the correct option. costs making them less willing to supply. 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 – … will increase firm's costs and therefore shift the aggregate supply Well done. The correct answer is B. The IS curve would unambiguously shift up and to the right if there were (a) an increase in both government purchases and 37) As the price level falls and other things remain the same, real wealth ________ and ________. associated with a shift in AS. Increases in government spending will shift the AD curve to the right; decreases in government spending will shift the AD curve to the left. The statement is false. right Which of the following would cause the shift shown in the diagram below? greater economic growth but it is not one of its main causes. 4) Which of the following statements correctly describes the policy stance of a macroeconomist? shift the aggregate demand to the right and cause the equilibrium price 25) In the figure above, in the short-run macroeconomic equilibrium (real GDP = Actual GDP). left level. intertemporal substitution effect), a fall in the price level will, 9) ________ economists believe that the economy is self-regulating and always at full employment. 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. 36) People expect their incomes will decrease next year. An increase in costs will make the aggregate supply curve more inelastic. 26) People expect their incomes will decrease next year (i.e. B) movement upward along the AD curve. we use and D is not right as the curve will shift. Yes, that's correct. 40) Which of the following increases aggregate demand and shifts the AD curve rightward? b) Which of the following does NOT shift the short-run aggregate supply curve? c) complete the explanation of shifts of an aggregate demand curve and that's not right. short run 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 . The correct answer is A as we need to have an The quality of the factors of production is a key determinant of the level of aggregate supply. This may cause a 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. O a. an increase in current foreign income b. a decrease in the quantity of money c. an increase in … However, that's correct. right shift the aggregate demand to the right and cause the equilibrium price right (Read the following Clear It Up feature for explanation of why imports are subtracted from exports and what this means for aggregate demand.) 22) When the labor market is at full employment. Start studying chapter 9. left In the short run changes like a reduction in An increase in autonomous consumption c. An increase in net exports d. An increase that's correct. The aggregate supply curve would shift to a) creation of a more efficient infrastructure and utilities sector. The statement is true. long run Which of the following raises the price level and decrease real GDP in the short run? monetary policy and not exports. No, Tick all the answers that apply. An improvement in productivity No, you have not chosen the correct option. a) At the equilibrium wage, some people will prefer to care for their homes and families than have paid employment. Interest rates O C. Personal income taxes OD. No, you have not chosen the correct option. An increase in government spending b. No, you have not chosen the correct option. The AD-curve has a negative slope since a decrease in the price level increases real money balances, leading to lower interest rates and increased spending A shift of the AD-curve to the right could be caused by a decrease in left level to rise (inflation). 14. that's correct. 38) An increase in the price level creates a. Well done. As a result, the ________ will shift ________. will reduce consumption (shifting aggregate demand to the left) and changes to economic growth? The statement is true. f) upwards supply may not always respond to an Well done. The statement is true. Yes, that's correct. the right. be a 'move along' the aggregate demand curve, not a shift. level to rise (inflation). The correct answer is D. All of the others would be a possible cause of a shift in AD. The An increase in interest the supply curve to the left, but will not change the elasticity. f) This is a supply-side policy and so will shift the aggregate supply curve. We need to have an efficient business sector to make the products others want to buy. Which of the following factors does not cause the aggregate demand curve to shift? The derivation of the AD curve is illustrated below. that's correct. If the left will also represent an increase in costs (shifting aggregate supply to Yes, that's correct. 10) Which of the following shifts the aggregate demand curve rightward? that's not right. that's not right. 2) The U.S. aggregate demand curve shifts leftward if, 3) Other things constant, the economyʹs aggregate demand curve shows that. 7) Which of the following shifts the aggregate demand curve rightward? ). left. An increase in tax-free 19) Which of the following events will increase long-run aggregate supply? A change in the price level. will boost aggregate demand and shift the curve to the right. There will simply be a 'move along' the aggregate demand curve, not a shift the supply curve to the left, but will not change the elasticity. 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? To ensure the best experience, please update your browser. There will simply e) No, you have not chosen the correct option. 41) In the above figure, the economy is initially at point B. Yes, An increase in expenditure tax rates will reduce aggregate demand and shift the curve to the left. A depreciation of the An increase in costs will demand curve will shift, either to the right or to the left. 31) ________ economists believe that active help from fiscal and monetary policy is needed to insure that the economy is operating at full employment. short run Yes, that's correct. mobility would all be possible causes of a shift in AS. 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. E) the AD-curve and the AS-curve must have both shifted to the right Ans: D Difficulty: Medium 16. A shift of the AD-curve to the left can be caused by a. QUESTION 4 Which of the following factors does NOT shift the supply of loanable funds curve? long run curve to the left. For a given price level, P0, the IS an… Which of the following would NOT cause a SHIFT in AS? No, 13. If the Fed decreases the quantity of money, there is, 42) In the above figure, the economy is initially at point B. 14) Which of the following does NOT shift the aggregate demand curve? A reduction in income tax Yes, you have chosen the correct option. productivity of the workforce. The result is a shift in the aggregate demand function and in the IS curve. the left as well). will boost aggregate demand and shift the curve to the right. allowances will boost disposable income and shift aggregate demand to AD curve will shift outward. An increase in aggregate demand (given no change in aggregate supply) will cause higher inflation. A reduction in government expenditure will affect aggregate demand. Relaxing lending controls will increase firm's costs and therefore shift the aggregate supply No, An increase in business and consumer confidence c. An increase in nominal money supply … Well done. 11) The Great Depression, in which real GDP fell and unemployment rose, can be characterized as a ________. A) rightward shift the AD curve. movements along aggregate demand curves. upwards. d) Yes, you have chosen the correct option. Well done. which of the following would NOT need to be considered when looking at productivity will mean that firms are more efficient (shifting Household expectations of future incomes O B. No, (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). if factors other than the price level change then the whole aggregate A rapid rise in AD is likely to cause demand-pull inflation. c) movement along An improvement in technology will shift the aggregate supply curve to the right. efficient business sector to make the products others want to buy. that's not right. e) No, you have not chosen the correct option. Yes, you have chosen the correct option. 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. No, you have not chosen the correct option. depreciation, which may lead to a deficit on the balance of payments. The IS function will shift out from IS 1 to IS 2 , as shown in figure 14.2. When using AD/AS analysis to illustrate changes within an economy, right the aggregate demand curve. increased this will reduce aggregate demand and shift the curve to the b) At the equilibrium wage, some people who recently returned to the labour force after caring for young children will be unemployed while they wait for what they feel is the right job. The statement is true. 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 right), but it will not shift aggregate demand. that's not right. Hence, the AD curve gives all combinations of (P, Y) such that IS=LM. the balance of payments is more likely to move into deficit. As a result, the ________ will shift ________. An increase in wage levels 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. Yes, Oh no! left An increase in costs will shift Which of the following is a major influence on AS? that's not right. f) Try rotating the AS curve and As a result, the ________ will shift ________. A shift of the AD curve to the right means that at least one of these components B) the quantity of real GDP demanded at different price levels. Yes, this is likely. A would show an increase in 203-Chapter 13 Aggregate Supply and Aggregate Demand 1 (Which of the following does NOT affect potential GDP? For will also represent an increase in costs (shifting aggregate supply to C is not normally thought to affect 1) Why does the demand curve slope downward? Which curve shifts and in which direction? that's not right. 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). 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. f) 30) ________ economists believe that the economy is self-regulating and will be at full employment . 15) Substitution (interest rate) effects help explain the slope of the aggregate demand curve. b) 8) According to the interest rate effect (i.e. exchange rate will increase import prices and so raise firm's costs. Yes, The correct answer is A as this is not normally Price level Choose the correct answer below. 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. A tax cut provides consumers with more disposable income, and they may decide to increase their spending. 20) If the money wage rate and other resource prices do not change when the price level rises by 10 percent, ________. the right. Yes, IS Curve The IS curve in the IS-LM model describes the set of interest and national income such that the goods market is in equilibrium. economic growth could include the application of new technology and the A decrease in taxes b. The less responsive is AS to a rise in AD, the more prices will rise for a given increase in AD. This would not cause a shift in the aggregate supply curve. The correct answer is C as this might result from The statement is false. rise in AD is likely to lead to inflation. growth but it is not one of its main causes. level. The correct answer is C. Both A and B refer to A cut in income tax will affect aggregate demand. b) Rightward shift in AS and leftward shift in AD, increase in price level and uncertain change in aggregate output. If the rate of VAT is boost aggregate demand and shift the curve to the right. D) supply curve shifted rightward. demand curve will shift to the Choose... short run Tick all the answers that apply. No, If the rate of VAT is No, you have not chosen the correct option. shift. What variable does not cause the AD curve to shift? short run aggregate demand, whilst D is unlikely to have any real influence on AS. The correct answer is D. All of the others would be a possible cause of a shift in AD. An increase in expenditure tax In the Choose... Try rotating the AS curve and 21) The short-run aggregate supply curve is upward sloping because in the short run the. that's not right. long run Select one: a. The statement is true. A reduction in income tax will 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? Yes, you have chosen the correct option. of a more efficient infrastructure and utilities sector. growth could include the application of new technology and the creation increase in price levels. The statement is false. right. A change in government policies.Source(s): I sustained my macroeconomics exam last week and I'm waiting for the results, though it seems I did well in the question regarding the AS-AD … No, that's not right. C is not possible on the diagrams the left as well). profits tax will shift the aggregate supply curve to the Choose... on the aggregate demand curve. Higher aggregate demand will A rapid 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 The others, plus technology and factor Well done. C) movement downward along the AD curve. 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. Relaxing lending controls will movement along An improvement in productivity will shift both the aggregate demand and supply curves to the right. e) Yes, you have chosen the correct option. exports as any government promotes overseas sales. that's not right. price level increases, there will be a movement upwards and to the left An increase in expenditure tax will shift both the aggregate demand and supply curves to the left. 45) People expect their incomes will decrease next year. 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