Question 1

A key issue in the presidential election of 2012 between President Obama and Mr.Romney concerned tax rates. President Obama favored increasing taxes,especially on the rich.As a result of a tax increase,
A) the aggregate demand curve shifts leftward.
B) the aggregate demand curve shifts rightward.
C) the aggregate supply curve shifts leftward.
D) the aggregate supply curve shifts rightward.

Accepted Answer

Increasing taxes, especially on the rich, would decrease their disposable income, leading to a decrease in their consumption. This, in turn, would lead to a decrease in aggregate demand, shifting the AD curve leftward.

Question 2

If the expected future inflation rate decreases,then
A) aggregate demand increases.
B) short-run aggregate supply increases.
C) aggregate demand decreases.
D) long-run aggregate supply decreases.

Accepted Answer

The answer of If the expected future inflation rate decreases,then
A)...

Question 3

Aggregate demand increases when
A) foreign incomes fall.
B) interest rates rise.
C) the exchange rate rises.
D) None of the above answers is correct.

Accepted Answer

None of the options A, B, or C directly cause an increase in aggregate demand. A) A fall in foreign incomes would likely decrease demand for a country's exports, reducing aggregate demand. B) Higher interest rates typically reduce consumption and investment, lowering aggregate demand. C) A rising exchange rate makes a country's goods more expensive abroad, potentially reducing exports and thus aggregate demand.

Question 4

When the prices of U.S.-produced goods rise and the price of foreign-produced goods do not change,the result is
A) an increase in exports.
B) a decrease in exports.
C) a decrease in imports.
D) no change in imports or exports.

Accepted Answer

If U.S.-produced goods become more expensive compared to foreign-produced goods, consumers may choose to purchase less expensive foreign goods instead. This would result in a decrease in exports for the U.S. because foreign consumers would be less likely to purchase U.S.-made products, and a decrease in imports is not necessarily guaranteed.

Question 5

-In the above figure,the economy initially is at point C.Then the domestic price level rises by 10.A
A) substitution effect would help move the economy to point D.
B) substitution effect would help move the economy to point B.
C) substitution effect would keep the economy at point C.
D) wealth effect would help move the economy to point B.

Accepted Answer

The answer of 
-In the above figure,the economy initially is...

Question 6

Which of the following issues prominent in the presidential election of 2012 shifts the aggregate demand curve rightward?
A) raising taxes on the rich
B) increasing Medicare, Medicaid, and Social Security payments
C) loosening immigration policies
D) allowing more oil drilling on Federal lands

Accepted Answer

Increasing Medicare, Medicaid, and Social Security payments would shift the aggregate demand curve rightward because it increases government spending, thereby increasing overall demand in the economy.

Question 7

Which of the following would NOT shift the U.S.aggregate demand curve?
A) a change in income in Canada
B) a change in the quantity of capital in the United States
C) an expectation that inflation will be lower in the future
D) U.S. monetary and fiscal policy

Accepted Answer

The answer of Which of the following would NOT shift...

Question 8

Suppose consumers decrease their consumption expenditure because they worry about what their income will be in the future.There is
A) a rightward shift of the aggregate demand curve.
B) an upward movement along the aggregate demand curve.
C) a downward movement along the aggregate demand curve.
D) a leftward shift of the aggregate demand curve.

Accepted Answer

When consumers decrease their consumption expenditure due to worry about future income, there is a decrease in aggregate demand. This results in a leftward shift of the aggregate demand curve.

Question 9

-In the above figure,the economy initially is at point B.Then price level rises by 10.The wealth effect will help
A) move the economy to point A.
B) move the economy to point C.
C) move the economy to point D.
D) keep the economy to point B.

Accepted Answer

The wealth effect refers to the change in consumer spending that results from a change in the value of wealth. When the price level rises, the real value of money decreases, leading to a decrease in consumer spending. This would shift the economy from point B to point C, where the aggregate demand is lower due to reduced purchasing power.

Question 10

-In the above figure,the economy is initially at point B.Then the price level falls by 10.The wealth effect will help
A) move the economy to point A.
B) move the economy to point C.
C) move the economy to point D.
D) keep the economy to point B.

Accepted Answer

The answer of 
-In the above figure,the economy is initially...

Question 11

Which of the following does NOT shift the aggregate demand curve?
A) a decrease in the quantity of money
B) an increase in people's expected future incomes
C) an increase in the price level
D) an increase in current foreign income

Accepted Answer

A decrease in the quantity of money (A) and an increase in people's expected future incomes (B) would shift the aggregate demand curve to the left and right, respectively. An increase in current foreign income (D) would also shift the aggregate demand curve to the right. However, an increase in the price level (C) would cause a movement along the aggregate demand curve, but it would not shift the entire curve.

Question 12

There are several reasons why the aggregate demand curve is downward sloping.Which of the following correctly describes one of these explanations?
A) A rise in the price level raises the purchasing power wealth and increases desired consumption.
B) A rise in the price level raises interest rates and increases investment spending.
C) A fall in the price level, holding foreign prices and the exchange rate constant, increases net exports.
D) A rise in the price level lowers the interest rate and increases investment spending.

Accepted Answer

A fall in the price level, holding foreign prices and the exchange rate constant, increases net exports.

Question 13

An increase in aggregate demand is shown by a
A) rightward shift the AD curve.
B) movement upward along the AD curve.
C) movement downward along the AD curve.
D) leftward shift the AD curve.

Accepted Answer

An increase in aggregate demand would mean a higher level of demand for goods and services in an economy. This would cause an increase in the overall price level and output level. So, the aggregate demand curve would shift to the right to represent this increase in demand. Therefore, option A is the correct answer.

Question 14

When the price level in France increases while the exchange rate and the price level in the United States remain the same,the result is
A) U.S.-made goods become relatively cheaper compared to French-made goods.
B) French citizens are more likely to buy U.S.-made goods.
C) U.S. citizens are less likely to buy French-made goods.
D) All of the above answers are correct.

Accepted Answer

When the price level in France increases, French-made goods become relatively more expensive compared to U.S.-made goods, causing U.S.-made goods to become relatively cheaper. Consequently, French citizens will be more likely to buy U.S.-made goods, while U.S. citizens are less likely to buy French-made goods. Therefore, all of the above answers are correct.

Question 15

Which of the following does NOT shift the aggregate demand curve?
A) a decrease in the quantity of money
B) an increase in investment
C) an increase in the price level
D) a decrease in taxes

Accepted Answer

An increase in the price level would cause a movement along the existing aggregate demand curve, but would not shift the curve itself. The other options would shift the aggregate demand curve (a decrease in the quantity of money or taxes would shift it to the left, while an increase in investment would shift it to the right).

Question 16

If higher inflation is expected in the future,then the
A) SAS curve shifts rightward.
B) AD curve shifts rightward.
C) LAS curve shifts rightward.
D) None of the above answers is correct.

Accepted Answer

If higher inflation is expected in the future, consumers and investors may increase their demand for goods and assets, causing the aggregate demand (AD) curve to shift rightward. This is because they want to purchase goods and assets before their prices increase due to inflation.

Question 17

Which of the following shifts the aggregate demand curve rightward?
A) a decrease in consumption
B) an increase in investment
C) a decrease in net exports
D) a decrease in government expenditure on goods and services

Accepted Answer

An increase in investment will increase aggregate demand because it results in firms producing more output, which increases real GDP and consumption.

Question 18

Which of the following changes would NOT shift the aggregate demand curve?
A) a change in fiscal policy
B) a change in monetary policy
C) a change in expectations about future income
D) an increase in technology

Accepted Answer

Changes in technology do not directly affect consumer or business confidence, government spending, or the availability of money and credit, all of which are factors that influence aggregate demand and shift the aggregate demand curve. Therefore, an increase in technology would not shift the aggregate demand curve.

Question 19

A change in ________ creates a movement along the aggregate demand curve but does not shift the aggregate demand curve.
A) tax rates
B) the price level
C) fiscal policy
D) None of the above because they all shift the aggregate demand curve.

Accepted Answer

A change in the price level creates movement along the aggregate demand curve, as it represents a change in the quantity of goods and services demanded at a given level of income and other aggregate demand determinants. However, changes in tax rates and fiscal policy both affect aggregate demand and would shift the aggregate demand curve. Therefore, the correct answer is B) the price level.

Question 20

A change in ________ creates a movement along the aggregate demand curve,while a change in ________ shifts the aggregate demand curve.
A) expected profits; tax rates
B) the price level; government expenditures
C) foreign income; the foreign exchange rate
D) real wealth; human capital

Accepted Answer

A change in the price level creates a movement along the aggregate demand curve as it affects the quantity of goods and services demanded at every level of income. On the other hand, a change in government expenditures, tax rates or other factors not related to the price level would shift the entire aggregate demand curve either to the left or right depending on whether it decreased or increased the level of aggregate demand. Therefore, the only option that reflects these changes correctly is option B, where a change in tax rates creates a shift in the aggregate demand curve.

Quiz 10: Aggregate Supply and Aggregate Demand

A key issue in the presidential election of 2012 between President Obama and Mr.Romney concerned tax rates. President Obama favored increasing taxes,especially on the rich.As a result of a tax increase,

If the expected future inflation rate decreases,then

Aggregate demand increases when

When the prices of U.S.-produced goods rise and the price of foreign-produced goods do not change,the result is

-In the above figure,the economy initially is at point C.Then the domestic price level rises by 10.A

Which of the following issues prominent in the presidential election of 2012 shifts the aggregate demand curve rightward?

Which of the following would NOT shift the U.S.aggregate demand curve?

Suppose consumers decrease their consumption expenditure because they worry about what their income will be in the future.There is

-In the above figure,the economy initially is at point B.Then price level rises by 10.The wealth effect will help

-In the above figure,the economy is initially at point B.Then the price level falls by 10.The wealth effect will help

Which of the following does NOT shift the aggregate demand curve?

There are several reasons why the aggregate demand curve is downward sloping.Which of the following correctly describes one of these explanations?

An increase in aggregate demand is shown by a

When the price level in France increases while the exchange rate and the price level in the United States remain the same,the result is

Which of the following does NOT shift the aggregate demand curve?

If higher inflation is expected in the future,then the

Which of the following shifts the aggregate demand curve rightward?

Which of the following changes would NOT shift the aggregate demand curve?

A change in ________ creates a movement along the aggregate demand curve but does not shift the aggregate demand curve.

A change in creates a movement along the aggregate demand curve,while a change in shifts the aggregate demand curve.