Question 1

A falling interest rate affects the demand for consumer __________ and shifts the AD curve to the __________.
A)nondurables;right
B)nondurables;left
C)durables;right
D)durables;left

Accepted Answer

Falling interest rates reduce the cost of borrowing, which typically increases the demand for durable goods (like cars and appliances that are financed) and shifts the aggregate demand (AD) curve to the right as consumers are more willing to spend.

Question 2

Suppose the price level is rising and it is widely forecast to rise even further.This forecast might cause __________ of some consumption plans,resulting in __________ the AD curve.
A)postponement;a rightward shift of
B)postponement;a leftward shift of
C)acceleration;a rightward shift of
D)acceleration;movement down along

Accepted Answer

If the price level is rising and expected to rise further, consumers might accelerate their consumption plans to avoid higher prices in the future, leading to an increase in aggregate demand, which is represented by a rightward shift of the AD curve.

Question 3

Suppose the real exchange rate of 10 Mexican pesos to the dollar changes to 9 pesos to the dollar.In this situation,the dollar has __________________,making American goods __________ expensive for Mexicans.
A)appreciated;less
B)appreciated;more
C)depreciated;less
D)depreciated;more

Accepted Answer

The answer of Suppose the real exchange rate of 10...

Question 4

Individuals' expectations of higher future income is a
A)rightward shifter of the AD curve.
B)leftward shifter of the AD curve.
C)reason for moving up along a given AD curve.
D)reason for moving down along a given AD curve.

Accepted Answer

Expectations of higher future income increase consumers' confidence, leading to more current spending. This increase in spending shifts the Aggregate Demand (AD) curve to the right, as it indicates a higher overall demand for goods and services at every price level.

Question 5

Individuals' expectations of lower future prices is a
A)rightward shifter of the AD curve.
B)leftward shifter of the AD curve.
C)reason for moving up along a given AD curve.
D)reason for moving down along a given AD curve.

Accepted Answer

Expectations of lower future prices will lead individuals to postpone their purchases in anticipation of lower prices, thus reducing the demand for goods and services at the current price level. This results in a leftward shift of the Aggregate Demand (AD) curve, indicating a decrease in aggregate demand at every price level, leading to a decrease in real output and employment in the short run.

Question 6

Suppose the real exchange rate of 115 Japanese yen to the dollar changes to 105 yen to the dollar.In this situation,the dollar has __________,making Japanese goods __________ expensive for Americans.
A)appreciated;less
B)appreciated;more
C)depreciated;less
D)depreciated;more

Accepted Answer

The answer of Suppose the real exchange rate of 115...

Question 7

Suppose a drop in prices in the stock market makes people feel less financially secure.This would cause __________ the economy's AD curve.
A)movement down along
B)movement up along
C)a rightward shift of
D)a leftward shift of

Accepted Answer

A drop in prices in the stock market would reduce household wealth, leading to a decrease in consumer spending. As a result, the AD curve would shift to the left, representing a decrease in the overall demand for goods and services in the economy.

Question 8

A rise in foreign real national income tends to raise U.S.__________,shifting the U.S.AD curve to the __________.
A)exports;left
B)exports;right
C)imports;left
D)imports;right

Accepted Answer

A rise in foreign real national income would increase demand for U.S. goods and services, leading to an increase in U.S. exports. This would shift the U.S. AD (aggregate demand) curve to the right.

Question 9

If investment changes because of a change in the price level,then the
A)economy moves from one point on an AD curve to another point on the same curve.
B)AD curve shifts.
C)economy moves from one point on a SRAS curve to another point on the same curve.
D)SRAS curve shifts.
E)none of the above

Accepted Answer

The answer of If investment changes because of a change...

Question 10

Suppose the real exchange rate of 105 Japanese yen to the dollar changes to 115 yen to the dollar.In this situation,the dollar has _________________,making Japanese goods __________ expensive for Americans.
A)appreciated;less
B)appreciated;more
C)depreciated;less
D)depreciated;more

Accepted Answer

The dollar has appreciated because it takes more yen to equal one dollar, making Japanese goods less expensive for Americans as they need fewer dollars to buy the same amount of yen.

Question 11

As the interest rate rises,the cost of a given investment project __________ and businesses invest __________.
A)rises;more
B)rises;less
C)falls;more
D)falls;less

Accepted Answer

When interest rates rise, the cost of borrowing money to fund an investment project also rises. This makes it more expensive for businesses to invest, so they are likely to invest less.

Question 12

Greater wealth makes people _____________ willing to spend on consumption,causing __________ the economy's AD curve.
A)more;movement down along
B)more;a rightward shift of
C)less;movement up along
D)less;a rightward shift of

Accepted Answer

Greater wealth means people have more disposable income and are more willing to spend, which increases consumption and shifts the economy's AD (aggregate demand) curve to the right. A movement down along the curve would suggest a decrease in consumption, which contradicts the scenario presented in the question. Less wealth would likely lead to less consumption and a leftward shift of the AD curve.

Question 13

An economic policy initiative results in the AD curve shifting to the right.As a result,
A)the price level will rise.
B)the price level will stay constant.
C)the price level will fall.
D)Real GDP will rise in the short run.
E)a and d

Accepted Answer

When the AD curve shifts to the right, it means that there is an increase in aggregate demand. This leads to an increase in both prices and real GDP in the short run. Therefore, the correct answer is option E, which states that the price level will rise (a) and real GDP will rise in the short run (d).

Question 14

Business optimism about future sales tends to __________ investment expenditures,shifting the AD curve to the __________.
A)increase;left
B)increase;right
C)decrease;left
D)decrease;right

Accepted Answer

Business optimism about future sales leads to an increase in investment expenditures, which shifts the aggregate demand (AD) curve to the right. This is because firms invest to expand their production capacity in anticipation of higher demand for their goods and services in the future. As a result, the AD curve shifts to the right, reflecting the increase in aggregate expenditures in the economy.

Question 15

As the interest rate rises,businesses invest __________ and the AD curve shifts to the __________.
A)more;right
B)more;left
C)less;right
D)less;left

Accepted Answer

When interest rates rise, businesses are likely to invest less due to increased cost of borrowing. This leads to a decrease in investment spending and causes the Aggregate Demand (AD) curve to shift to the left. Therefore, the correct choice is D.

Question 16

An increase in the interest rate __________ purchases of consumer __________.
A)increases;durables
B)increases;nondurables
C)reduces;durables
D)reduces;nondurables

Accepted Answer

When the interest rate increases, it discourages consumers from borrowing money for big purchases like durables such as cars or homes. As a result, purchases of consumer durables decrease.

Question 17

Suppose the real exchange rate of 10 Mexican pesos to the dollar changes to 9 pesos to the dollar.In this situation,the dollar has ________________,making Mexican goods __________ expensive for Americans.
A)appreciated;less
B)appreciated;more
C)depreciated;less
D)depreciated;more

Accepted Answer

The answer of Suppose the real exchange rate of 10...

Question 18

A decrease in business taxes,causes the expected profitability of investment projects to __________,which then shifts the AD curve to the __________.
A)rise;right
B)rise;left
C)decline;right
D)decline;left

Accepted Answer

A decrease in business taxes increases the profitability of investment projects, which encourages businesses to invest more, leading to an increase in aggregate demand. This shift of AD curve to the right is represented by the letter A.

Question 19

When the government lowers income taxes,consumption is ______________,causing a __________ the AD curve.
A)stimulated;rightward shift of
B)stimulated;movement down along
C)reduced;leftward shift of
D)reduced;movement up along

Accepted Answer

When income taxes are lowered, people have more disposable income, which leads to an increase in consumption. This increase in consumption causes a rightward shift of the AD (aggregate demand) curve, as there is now a higher demand for goods and services.

Question 20

As income taxes rise,disposable income __________,causing __________ the AD curve.
A)increases;movement down along
B)increases;a rightward shift of
C)decreases;movement up along
D)decreases;a leftward shift of

Accepted Answer

As income taxes increase, disposable income decreases, resulting in less spending by consumers. This leads to a leftward shift of the AD (aggregate demand) curve, as there is less demand for goods and services in the economy.

Quiz 8: Aggregate Demand and Aggregate Supply

A falling interest rate affects the demand for consumer and shifts the AD curve to the .

Suppose the price level is rising and it is widely forecast to rise even further.This forecast might cause of some consumption plans,resulting in the AD curve.

Suppose the real exchange rate of 10 Mexican pesos to the dollar changes to 9 pesos to the dollar.In this situation,the dollar has ________,making American goods expensive for Mexicans.

Individuals' expectations of higher future income is a

Individuals' expectations of lower future prices is a

Suppose the real exchange rate of 115 Japanese yen to the dollar changes to 105 yen to the dollar.In this situation,the dollar has ,making Japanese goods expensive for Americans.

Suppose a drop in prices in the stock market makes people feel less financially secure.This would cause __________ the economy's AD curve.

A rise in foreign real national income tends to raise U.S.,shifting the U.S.AD curve to the .

If investment changes because of a change in the price level,then the

Suppose the real exchange rate of 105 Japanese yen to the dollar changes to 115 yen to the dollar.In this situation,the dollar has _______,making Japanese goods expensive for Americans.

As the interest rate rises,the cost of a given investment project and businesses invest .

Greater wealth makes people ___ willing to spend on consumption,causing the economy's AD curve.

An economic policy initiative results in the AD curve shifting to the right.As a result,

Business optimism about future sales tends to investment expenditures,shifting the AD curve to the .

As the interest rate rises,businesses invest and the AD curve shifts to the .

An increase in the interest rate purchases of consumer .

Suppose the real exchange rate of 10 Mexican pesos to the dollar changes to 9 pesos to the dollar.In this situation,the dollar has ______,making Mexican goods expensive for Americans.

A decrease in business taxes,causes the expected profitability of investment projects to ,which then shifts the AD curve to the .

When the government lowers income taxes,consumption is ____,causing a the AD curve.

As income taxes rise,disposable income ,causing the AD curve.