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