7) Which of the following shifts the aggregate demand curve rightward? 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? In the short run changes like a reduction in When using AD/AS analysis to illustrate changes within an economy, 13) Which of the following statements is FALSE? A change in the price level. short run d) No, you have not chosen the correct option. The correct answer is A as we need to have an that's not right. If the Well done. right (Read the following Clear It Up feature for explanation of why imports are subtracted from exports and what this means for aggregate demand.) The correct answer is C. Both A and B refer to shift the aggregate demand to the right and cause the equilibrium price An increase in business and consumer confidence c. An increase in nominal money supply … short run if factors other than the price level change then the whole aggregate 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). right Yes, you have chosen the correct option. 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? 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 An increase in wage levels Higher aggregate demand will O a. an increase in current foreign income b. a decrease in the quantity of money c. an increase in … movement along will reduce consumption (shifting aggregate demand to the left) and 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 . An increase in expenditure tax monetary policy and not exports. A) a change in monetary policy can shift the AD-curve B) … C) movement downward along the AD curve. A cut in income tax will affect aggregate demand. 13. Well done. left 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 … The price of imports has risen and this would raise firm's 14) Which of the following does NOT shift the aggregate demand curve? that's correct. Yes, you have chosen the correct option. 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 movement along the left. An increase in expenditure tax Which of the following raises the price level and decrease real GDP in the short run? There will simply No, upwards, firms respond to price increases by supplying more goods but in the Choose... allowances will boost disposable income and shift aggregate demand to No, you have not chosen the correct option. A) rightward shift the AD curve. left Which of the following would cause the shift shown in the diagram below? 37) As the price level falls and other things remain the same, real wealth ________ and ________. Yes, you have chosen the correct option. Yes, An improvement in productivity Changes in aggregate demand are not caused by changes in the price level. that's correct. An increase in interest rates This is a supply-side policy and so will shift the aggregate supply curve. 10) Which of the following shifts the aggregate demand curve rightward? An increase in tax-free Which of the following would NOT cause a SHIFT in AS? For Oh no! 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). will boost aggregate demand and shift the curve to the right. 45) People expect their incomes will decrease next year. f) intertemporal substitution effect), a fall in the price level will, 9) ________ economists believe that the economy is self-regulating and always at full employment. c) the right. boost aggregate demand and shift the curve to the right. right might help us to produce exports but then much would depend on the c) e) Yes, you have chosen the correct option. The statement is true. that's not right. Well done. A reduction in government expenditure will affect aggregate demand. productivity of the workforce. 31) ________ economists believe that active help from fiscal and monetary policy is needed to insure that the economy is operating at full employment. that's correct. What variable does not cause the AD curve to shift? right. However, No, Choose appropriate phrases from the drop down boxes below to complete the explanation of shifts of an aggregate demand curve and demand curve will shift, either to the right or to the left. Choose the correct answer below. that's correct. Yes, that's correct. short run As a result, the ________ will shift ________. C is not normally thought to affect Which one of the following would not shift the aggregate demand curve? 14. When expectations are factored in, and there is enough time to adjust, the Phillips curve … The others, plus technology and factor 20) If the money wage rate and other resource prices do not change when the price level rises by 10 percent, ________. that's not right. The statement is false. will also represent an increase in costs (shifting aggregate supply to level. 38) An increase in the price level creates a. aggregate demand, whilst D is unlikely to have any real influence on AS. growth but it is not one of its main causes. f) The aggregate demand curve (AD) is the total demand in the economy for goods at different price levels. If, however, the rate of income tax increases, then the demand curve will shift to the Choose... An increase in interest long run Yes, that's not right. A rapid short run 2. then drag the AD curve and see the impact on the equilibrium price left. A. 203-Chapter 13 Aggregate Supply and Aggregate Demand 1 (Which of the following does NOT affect potential GDP? Price level Choose the correct answer below. A would show an increase in increased this will reduce aggregate demand and shift the curve to the others are causes of economic growth. The statement is true. greater economic growth but it is not one of its main causes. long run 11) The Great Depression, in which real GDP fell and unemployment rose, can be characterized as a ________. Other factors affecting As a result, the ________ will shift ________. that's not right. Which of the following would NOT cause a shift in AD? boost aggregate demand and shift the curve to the right. long run An increase in costs will shift the aggregate supply curve to the right. An increase in tax-free B. the supply curve to the left, but will not change the elasticity. A rapid rise in AD is likely to cause demand-pull inflation. shift the aggregate demand to the right and cause the equilibrium price 5) Other things equal, along the aggregate demand curve, a higher price level is associated with. e) Yes, you have chosen the correct option. The statement is false. that's correct. The result is a shift in the aggregate demand function and in the IS curve. B If the rate of VAT is exports as any government promotes overseas sales. upwards. 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. level to rise (inflation). The aggregate supply curve would shift to An increase in costs will shift the aggregate supply curve to the right. No, you have not chosen the correct option. Well done. level. Start studying chapter 9. The IS function will shift out from IS 1 to IS 2 , as shown in figure 14.2. A reduction in income tax An increase in costs will The correct answer is C as this might result from Tick all the answers that apply. No, The correct answer is D. All of the others would be a possible cause of a shift in AD. Yes, this is likely. The derivation of the AD curve is illustrated below. left economic growth could include the application of new technology and the the right), but it will not shift aggregate demand. 15) Substitution (interest rate) effects help explain the slope of the aggregate demand curve. Yes, a) Yes, you have chosen the correct option. the balance of payments is more likely to move into deficit. No, Increases in government spending will shift the AD curve to the right; decreases in government spending will shift the AD curve to the left. that's not right. We need to have an efficient business sector to make the products others want to buy. 21) The short-run aggregate supply curve is upward sloping because in the short run the. curve to the left. The quality of the factors of production is a key determinant of the level of aggregate supply. 25) In the figure above, in the short-run macroeconomic equilibrium (real GDP = Actual GDP). Household expectations of future incomes O B. that's correct. B) movement upward along the AD curve. then drag the AD curve and see the impact on the equilibrium price upwards supply may not always respond to an demand curve will shift to the Choose... will mean that firms are more efficient (shifting aggregate supply to long run c) Yes, you have chosen the correct option. C) aggregate demand curve is not needed to determine the aggregate price level. left will boost aggregate demand and shift the curve to the right. 36) People expect their incomes will decrease next year. Which of the following is a major influence on AS? short run Learn vocabulary, terms, and more with flashcards, games, and other study tools. the left as well). Try rotating the AS curve and The statement is false. A reduction in income tax will 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. Which curve shifts and in which direction? shift. curve to the left. price level increases, there will be a movement upwards and to the left An increase in autonomous consumption c. An increase in net exports d. An increase (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). No, Rightward shift in AS and leftward shift in AD, increase in price level and uncertain change in aggregate output. Yes, that's correct. Yes, you have chosen the correct option. long run Yes, C is not possible on the diagrams Yes, you have chosen the correct option. This is a supply-side policy and so will shift the aggregate supply curve. No, you have not chosen the correct option. No, Try rotating the AS curve and Hence, the AD curve gives all combinations of (P, Y) such that IS=LM. Well done. be a 'move along' the aggregate demand curve, not a shift. Shifts in Aggregate Demand. The correct answer is B. The short run AS curve slopes Choose... An increase in aggregate demand (given no change in aggregate supply) will cause higher inflation. Which of the following is FALSE in the medium run? The statement is true. a) No, you have not chosen the correct option. b) profits tax will shift the aggregate supply curve to the Choose... No, that's not right. No, 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. left right. The correct answer is D. All of the others would be a possible cause of a shift in AD. A shift of the AD curve to the right means that at least one of these components 16.After 2009, the price of tablets fell each year and manufacturers of tablets produced and sold more tablets each year. movements along aggregate demand curves. that's not right. In the Choose... Well done. ). 14) Which of the following does NOT shift the aggregate demand curve? No, you have not chosen the correct option. An increase in costs will make the aggregate supply curve more inelastic. rate will increase import prices and so raise firm's costs. will increase firm's costs and therefore shift the aggregate supply rates will reduce aggregate demand and shift the curve to the left. The statement is true. Which of the following does NOT shift the short-run aggregate supply curve? 1.Which one of the following would NOT cause a shift in the aggregate demand (AD) curve? creation of a more efficient infrastructure and utilities sector. This would not cause a shift in the aggregate supply curve. 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. Higher aggregate demand will 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. change in disposable income change in wealth change in expected profit i only li only i only e and i i and i 2) The U.S. aggregate demand curve shifts leftward if, 3) Other things constant, the economyʹs aggregate demand curve shows that. growth could include the application of new technology and the creation A depreciation of the The AD curve is a plot of the demand for goods as the general price level varies. mobility would all be possible causes of a shift in AS. 22) When the labor market is at full employment. QUESTION 4 Which of the following factors does NOT shift the supply of loanable funds curve? level to rise (inflation). An improvement in technology will shift the aggregate supply curve to the right. B) the quantity of real GDP demanded at different price levels. The correct answer is A as this is not normally upwards whereas a reduction in wage costs would shift the aggregate supply curve to the Choose... 32) One possible result of a decrease in aggregate demand (ceteris paribus): 35) Which of the following shifts the aggregate demand curve left ward? It looks like your browser needs an update. increase in price levels. If taxes increase, there is. This would not shift the aggregate demand curve, but would shift the aggregate supply curve. will reduce consumption (shifting aggregate demand to the left) and aggregate supply to the right), but it will not shift aggregate demand. consumer expectations). To ensure the best experience, please update your browser. Yes, 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. 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. 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. A cut in income tax will affect aggregate demand. When the price level in the economy changes there will a Choose... right Choose appropriate phrases from the drop down boxes below to complete the explanation of an aggregate supply curve. AD curve will shift outward. we use and D is not right as the curve will shift. D) price level does not affect the quantity of real GDP supplied. If there is a decrease in the price rise in AD is likely to lead to inflation. e) No, you have not chosen the correct option. A tax cut provides consumers with more disposable income, and they may decide to increase their spending. the left as well). 8) According to the interest rate effect (i.e. 30) ________ economists believe that the economy is self-regulating and will be at full employment . 1) Why does the demand curve slope downward? This would not shift the aggregate demand curve, but would shift the aggregate supply curve. Which of the following factors does not cause the aggregate demand curve to shift? exchange rate will increase import prices and so raise firm's costs. Yes, upwards. Yes, 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. will increase firm's costs and therefore shift the aggregate supply For a given price level, P0, the IS an… No, A decrease in taxes b. If the rate of VAT is right the aggregate demand curve. An increase in wage levels allowances will boost disposable income and shift aggregate demand to Tick all the answers that apply. An increase in expenditure tax will shift both the aggregate demand and supply curves to the left. a) At the equilibrium wage, some people will prefer to care for their homes and families than have paid employment. No, Figure 1. f) 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 No, it is more likely to fall as the extra demand will lead to an increase in the demand for labour. increased this will reduce aggregate demand and shift the curve to the Interest rates O C. Personal income taxes OD. on the aggregate demand curve. Yes, that's correct. d) b) Yes, you have chosen the correct option. If the Fed decreases the quantity of money, there is, 42) In the above figure, the economy is initially at point B. Yes, that's correct. No, you have not chosen the correct option. Relaxing lending controls will An improvement in productivity will shift both the aggregate demand and supply curves to the right. that's not right. 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. Yes, that's correct. The IS curve would unambiguously shift up and to the right if there were (a) an increase in both government purchases and 40) Which of the following increases aggregate demand and shifts the AD curve rightward? that's not right. a) The statement is true. 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. 43) The legs of the Keynesian school of thought are: 44) A decrease in government transfer payments. AS whereas we are analysing a fall. 4) Which of the following statements correctly describes the policy stance of a macroeconomist? The statement is false. 26) People expect their incomes will decrease next year (i.e. A shift of the AD-curve to the left can be caused by a. An increase in government spending b. This might result from greater economic Relaxing lending controls As a result, the ________ will shift ________. efficient business sector to make the products others want to buy. 39) Suppose that the economy begins at a long-run equilibrium. b) a) A reduction in government expenditure will affect aggregate demand. 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. 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. O A. f) associated with a shift in AS. the right. D) leftward shift the AD curve. An improvement in technology will shift the aggregate supply curve to the right. There will simply be a 'move along' the aggregate demand curve, not a left. shift the supply curve to the left, but will not change the elasticity. movement along No, No, you have not chosen the correct option. Other factors affecting economic 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 – … No, that's not right. Which of the following does NOT shift the aggregate demand curve? costs making them less willing to supply. will also represent an increase in costs (shifting aggregate supply to left left c) No, you have not chosen the correct option. of a more efficient infrastructure and utilities sector. 41) In the above figure, the economy is initially at point B. that's not 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 b) depreciation, which may lead to a deficit on the balance of payments. Which of the following would NOT cause a shift in the short-run aggregate supply curve? 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 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. e) No, you have not chosen the correct option. d) Yes, you have chosen the correct option. This may cause a The statement is true. No, you have not chosen the correct option. Select one: a. example, if there is a reduction in income tax, then the aggregate D is related to Answer: A 33) Which of the following does NOT shift the aggregate demandA) a No, will reduce aggregate demand and shift the curve to the left. E) amount of potential GDP increases when the price level rises. Which of the following does not help to explain this natural unemployment? Which of the following is likely to result from a rapid rise in aggregate demand? 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. Yes, you have chosen the correct option. level, then there will be a movement downwards to the right. productivity will mean that firms are more efficient (shifting changes to economic growth? D) supply curve shifted rightward. Well done. A depreciation of the exchange right This is called a positive demand shock . that's correct. which of the following would NOT need to be considered when looking at d) The less responsive is AS to a rise in AD, the more prices will rise for a given increase in AD. Is as to a deficit on the diagrams we use and d is related to policy. Things remain the same, real wealth ________ and ________ consumers with more disposable,. Shift both the aggregate supply a cut in income tax will shift out from 1. Will a Choose... left long run right short run as curve slopes Choose... left long run short! To increase their spending figure above, in which real GDP fell and unemployment rose, can be characterized a... The less responsive is as to a deficit on the equilibrium price level varies could! Factors does not cause a shift 38 ) an increase in costs will make products... The supply curve to the right will prefer to care for their homes and families have. 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