Question 1

A reduction in government spending causes the equilibrium level of aggregate output to ________ at any given interest rate and shifts the ________ curve to the ________,everything else held constant.
A) rise; MP; right
B) fall; IS; left
C) fall; MP; left
D) rise; IS; right

Accepted Answer

A reduction in government spending would decrease overall demand and cause a leftward shift of the IS curve. This would result in a lower equilibrium level of aggregate output at any given interest rate.

Question 2

Everything else held constant,an autonomous tightening of monetary policy will cause ________.
A) the quantity of aggregate demand to increase
B) the quantity of aggregate demand to decrease
C) aggregate demand to increase
D) aggregate demand to decrease

Accepted Answer

An autonomous tightening of monetary policy involves the central bank reducing the money supply, which leads to higher interest rates and less borrowing and spending by consumers and businesses. This decrease in spending will lead to a decrease in aggregate demand.

Question 3

Everything else held constant,an increase in autonomous consumer spending will cause the IS curve to shift to the ________ and aggregate demand will ________.
A) right; increase
B) right; decrease
C) left; increase
D) left; decrease

Accepted Answer

An increase in autonomous consumer spending will shift the IS curve to the right, as it increases the level of output at different interest rates, ceteris paribus. This results in an increase in aggregate demand, as it reflects increased spending in the economy. Thus, the correct choice is A.

Question 4

Other things equal,a decrease in autonomous consumption shifts the ________ curve to the ________.
A) IS; right
B) IS; left
C) MP; left
D) MP; right

Accepted Answer

Autonomous consumption refers to consumption that is independent of income, so a decrease in autonomous consumption would lead to a decrease in overall aggregate demand. This means the IS curve, which shows the combinations of interest rates and output levels that satisfy equilibrium in the goods market, will shift to the left.

Question 5

Everything else held constant,a decrease in autonomous consumer spending will cause the IS curve to shift to the ________ and aggregate demand will ________.
A) right; increase
B) right; decrease
C) left; increase
D) left; decrease

Accepted Answer

A decrease in autonomous consumer spending will lead to a decrease in overall consumption expenditure, which will cause a decrease in aggregate demand. This will cause a leftward shift in the IS curve.

Question 6

The aggregate demand curve is downward sloping because a higher inflation rate leads the central bank to ________ real interest rates,thereby ________ the level of equilibrium aggregate output.,everything else held constant.
A) raise; lowering
B) raise; raising
C) reduce; lowering
D) reduce; raising

Accepted Answer

A higher inflation rate typically leads the central bank to raise real interest rates as a measure to control inflation. Higher real interest rates make borrowing more expensive, which tends to reduce consumption and investment, thereby lowering the level of equilibrium aggregate output.

Question 7

The aggregate demand curve is downward sloping because a higher inflation rate leads the central bank to raise ________ interest rates,thereby ________ the level of equilibrium aggregate output.,everything else held constant.
A) real; lowering
B) real; raising
C) nominal; lowering
D) nominal; raising

Accepted Answer

The answer of The aggregate demand curve is downward sloping...

Question 8

Everything else held constant,a decrease in autonomous planned investment spending will cause the IS curve to shift to the ________ and aggregate demand will ________.
A) right; increase
B) right; decrease
C) left; increase
D) left; decrease

Accepted Answer

A decrease in autonomous planned investment spending will lead to a decrease in overall aggregate demand, causing the IS curve to shift to the left.

Question 9

A decrease in autonomous planned investment spending,other things equal,shifts the ________ curve to the ________.
A) IS; right
B) IS; left
C) MP; left
D) MP; right

Accepted Answer

Autonomous planned investment spending is a component of the IS curve, so a decrease in it will shift the IS curve to the left.

Question 10

Everything else held constant,an autonomous easing of monetary policy will cause ________.
A) aggregate demand to increase
B) aggregate demand to decrease
C) the quantity of aggregate demand to increase
D) the quantity of aggregate demand to decrease

Accepted Answer

An autonomous easing of monetary policy means that the central bank is increasing the money supply and decreasing interest rates. This will make borrowing cheaper and increase consumer and business spending, leading to an increase in aggregate demand.

Question 11

Everything else held constant,a decrease in net taxes will cause the IS curve to shift to the ________ and aggregate demand will ________.
A) right; increase
B) right; decrease
C) left; increase
D) left; decrease

Accepted Answer

A decrease in net taxes will increase disposable income, which will increase consumption and shift the IS curve to the right. This will lead to an increase in aggregate demand.

Question 12

An increase in government spending causes the equilibrium level of aggregate output to ________ at any given interest rate and shifts the ________ curve to the ________,everything else held constant.
A) rise; MP; right
B) rise; IS; right
C) fall; IS; left
D) fall; MP; left

Accepted Answer

An increase in government spending increases aggregate expenditure, causing an upward shift in the IS curve. This leads to an increase in equilibrium output at any given interest rate. Therefore, B is the correct answer.

Question 13

An increase in investment spending because companies become more optimistic about investment profitability causes the aggregate demand function to shift up,the equilibrium level of aggregate output to ________,and the IS curve to shift to the ________,everything else held constant.
A) rise; left
B) rise; right
C) fall; left
D) fall; right

Accepted Answer

An increase in investment spending causes the aggregate demand function to shift up, which leads to a rise in the equilibrium level of aggregate output. As a result, the IS curve shifts to the right.

Question 14

A decrease in investment spending because companies become more pessimistic about investment profitability causes the aggregate demand function to shift down,the equilibrium level of aggregate output to ________,and the IS curve to shift to the ________,everything else held constant.
A) rise; left
B) rise; right
C) fall; left
D) fall; right

Accepted Answer

A decrease in investment spending will lead to a decrease in aggregate demand, which will shift the aggregate demand function down. As a result, the equilibrium level of aggregate output will fall. The IS curve will shift to the left because at every level of interest rates, there will be a lower level of output demanded due to the decrease in investment spending.

Question 15

A decline in taxes ________ consumer expenditure and shifts the ________ curve to the ________,everything else held constant.
A) raises; MP; right
B) lowers; IS; left
C) raises; IS; right
D) lowers; MP; left

Accepted Answer

A decline in taxes increases disposable income, leading to an increase in consumer expenditure. This, in turn, shifts the IS (Investment-Saving) curve to the right, reflecting an increase in overall demand in the goods and services market at each interest rate.

Question 16

A decline in autonomous consumer expenditure causes the aggregate demand function to shift ________ and the equilibrium level of aggregate output to ________,everything else held constant.
A) up; rise
B) up; fall
C) down; rise
D) down; fall

Accepted Answer

A decline in autonomous consumer expenditure will shift the aggregate demand curve to the left, causing the equilibrium level of aggregate output to fall, assuming everything else is held constant.

Question 17

Everything else held constant,an autonomous easing of monetary policy will cause ________.
A) the quantity of aggregate demand to increase
B) the quantity of aggregate demand to decrease
C) aggregate demand to decrease
D) aggregate demand to increase

Accepted Answer

An autonomous easing of monetary policy leads to a decrease in interest rates, which encourages borrowing and spending, leading to an increase in aggregate demand. Therefore, the correct option is D.

Question 18

If Canadian college students decide that drinking Mexican-brewed beer helps one get noticed,net exports will tend to fall,causing aggregate demand to ________ and the ________ curve to shift to the left,everything else held constant.
A) fall; MP
B) fall; IS
C) rise; MP
D) rise; IS

Accepted Answer

If Canadian college students increase their consumption of Mexican-brewed beer, it implies an increase in imports from Mexico. This would lead to a decrease in net exports (exports minus imports) for Canada. A fall in net exports reduces aggregate demand in the Canadian economy. The IS curve, which represents the relationship between interest rates and levels of output that are consistent with equilibrium in the goods and services market, would shift to the left as a result of the decrease in aggregate demand.

Question 19

Everything else held constant,an increase in government spending will cause ________.
A) aggregate demand to increase
B) aggregate demand to decrease
C) the quantity of aggregate demand to increase
D) the quantity of aggregate demand to decrease

Accepted Answer

An increase in government spending directly increases aggregate demand as it increases government purchases, which in turn increases demand for goods and services in the economy.

Question 20

Everything else held constant,an increase in autonomous planned investment spending will cause the IS curve to shift to the ________ and aggregate demand will ________.
A) right; increase
B) right; decrease
C) left; increase
D) left; decrease

Accepted Answer

An increase in autonomous planned investment spending will shift the IS curve to the right as it leads to an increase in aggregate demand. This is because an increase in investment spending will increase the demand for factors of production, such as labor and capital goods, which will lead to an increase in income and output in the short run. Therefore, choice A is the correct answer.

Quiz 23: The Monetary Policy and Aggregate Demand Curves

A reduction in government spending causes the equilibrium level of aggregate output to at any given interest rate and shifts the curve to the ,everything else held constant.

Everything else held constant,an autonomous tightening of monetary policy will cause ________.

Everything else held constant,an increase in autonomous consumer spending will cause the IS curve to shift to the and aggregate demand will .

Other things equal,a decrease in autonomous consumption shifts the curve to the .

Everything else held constant,a decrease in autonomous consumer spending will cause the IS curve to shift to the and aggregate demand will .

The aggregate demand curve is downward sloping because a higher inflation rate leads the central bank to real interest rates,thereby the level of equilibrium aggregate output.,everything else held constant.

The aggregate demand curve is downward sloping because a higher inflation rate leads the central bank to raise interest rates,thereby the level of equilibrium aggregate output.,everything else held constant.

Everything else held constant,a decrease in autonomous planned investment spending will cause the IS curve to shift to the and aggregate demand will .

A decrease in autonomous planned investment spending,other things equal,shifts the curve to the .

Everything else held constant,an autonomous easing of monetary policy will cause ________.

Everything else held constant,a decrease in net taxes will cause the IS curve to shift to the and aggregate demand will .

An increase in government spending causes the equilibrium level of aggregate output to at any given interest rate and shifts the curve to the ,everything else held constant.

An increase in investment spending because companies become more optimistic about investment profitability causes the aggregate demand function to shift up,the equilibrium level of aggregate output to ,and the IS curve to shift to the ,everything else held constant.

A decrease in investment spending because companies become more pessimistic about investment profitability causes the aggregate demand function to shift down,the equilibrium level of aggregate output to ,and the IS curve to shift to the ,everything else held constant.

A decline in taxes consumer expenditure and shifts the curve to the ,everything else held constant.

A decline in autonomous consumer expenditure causes the aggregate demand function to shift and the equilibrium level of aggregate output to ,everything else held constant.

Everything else held constant,an autonomous easing of monetary policy will cause ________.

If Canadian college students decide that drinking Mexican-brewed beer helps one get noticed,net exports will tend to fall,causing aggregate demand to and the curve to shift to the left,everything else held constant.

Everything else held constant,an increase in government spending will cause ________.

Everything else held constant,an increase in autonomous planned investment spending will cause the IS curve to shift to the and aggregate demand will .