Question 1

Suppose the price level decreases.How will aggregate demand be affected?

Accepted Answer

A decrease in the price level increases the purchasing power of consumers' money, leading to an increase in the quantity of goods and services demanded across the economy. This is represented by a movement along the aggregate demand curve to a higher quantity demanded, not a shift of the curve itself.

Question 2

How will a rise in the price level affect the aggregate expenditure curve and the aggregate demand curve?

Accepted Answer

The answer of How will a rise in the price...

Question 3

How would an increase in the Canadian price level, other things constant, affect imports and exports?

Accepted Answer

An increase in the Canadian price level would make Canadian goods more expensive relative to foreign goods, thereby decreasing demand for Canadian exports and increasing demand for foreign imports. Therefore, Canadian exports would decrease and Canadian imports would increase.

Question 4

Suppose the price level increases.Other things constant, will consumption spending increase or decrease?

Accepted Answer

When the price level increases, the real value of wealth decreases and individuals will have less purchasing power. Therefore, consumption spending will decrease.

Question 5

Suppose the price level decreases.How will the aggregate expenditure line and the aggregate demand curve be affected?

Accepted Answer

When the price level decreases, consumers have more purchasing power, which increases consumption and shifts the aggregate expenditure line upward. Additionally, a lower price level increases the quantity of goods and services demanded, causing movement down along the aggregate demand curve.

Question 6

Which of the following would cause a rightward shift of the aggregate demand curve?

Accepted Answer

An increase in planned investment would increase aggregate demand because it would increase the level of spending in the economy. A drop in the price level (B) would actually cause a leftward shift of the aggregate demand curve because it would decrease spending. A rise in the price level (C) would not cause a shift of the aggregate demand curve, but rather a movement up along the curve. A decrease in autonomous consumption (D) would cause a leftward shift of the aggregate demand curve because it would decrease overall spending in the economy.

Question 7

How will a decrease in the price level affect the aggregate demand curve?

Accepted Answer

A decrease in the price level results in an increase in the quantity of goods and services demanded, which is represented by a movement down and to the right along the aggregate demand curve, not a shift of the curve itself.

Question 8

How will an increase in the price level affect the aggregate demand curve?

Accepted Answer

An increase in the price level results in a decrease in the quantity of goods and services demanded, which is represented by a movement up and to the left along the aggregate demand curve, not a shift of the curve itself.

Question 9

What would be the effect of a decrease in the price level?

Accepted Answer

A decrease in the price level would increase the purchasing power of consumers, leading to an increase in the demand for goods and services. This would result in a rise in the equilibrium level of output demanded as shown by a movement upward along a particular aggregate demand curve. Therefore, option B is the correct choice. A decrease in the price level would not lead to a leftward shift in the aggregate demand curve or a downward shift in the aggregate expenditure line.

Question 10

How will an increase in the price level affect the aggregate expenditure line?

Accepted Answer

An increase in the price level decreases the real value of money, which reduces consumer purchasing power and leads to lower consumption and investment. This decrease in consumption and investment causes the aggregate expenditure line to shift downward, as it represents a decrease in overall spending at each level of income.

Question 11

How will a decrease in the price level affect the aggregate demand curve?

Accepted Answer

A decrease in the price level does not shift the aggregate demand curve; instead, it results in a movement downward along the curve because it increases the quantity of goods and services demanded.

Question 12

How will a decrease in the price level affect the aggregate expenditure line?

Accepted Answer

A decrease in the price level increases the real wealth of households, leading to an increase in consumption and thus shifting the aggregate expenditure line upward.

Question 13

Which of the following would be an effect of a decline in the Canadian price level, other things constant?

Accepted Answer

A decline in the Canadian price level would make Canadian goods cheaper for foreign buyers, stimulating exports, and make foreign goods relatively more expensive for Canadians, discouraging imports. This results in a rightward movement along the aggregate demand curve.

Question 14

Suppose the price level decreases.Other things constant, will people consume more or less?

Accepted Answer

When the price level decreases, the real value of people's wealth increases. This means that people feel wealthier, which in turn increases their purchasing power. As a result, people are likely to consume more.

Question 15

Suppose the Canadian price level rises relative to price levels in other countries.How would Canada's consumption and exports be affected?

Accepted Answer

When the Canadian price level rises relative to other countries, Canadian goods become more expensive for both Canadians and foreigners. This leads to a decrease in consumption as Canadians find foreign goods more attractive price-wise, and a decrease in net exports as foreign buyers reduce their purchases of the now more expensive Canadian goods.

Question 16

Which of the following would cause a leftward shift of the aggregate demand curve?

Accepted Answer

A leftward shift in the aggregate demand curve can be caused by a decrease in consumption or investment. An upward shift in the saving function implies that at any given income level, people are saving more and consuming less. This reduction in consumption would lead to a decrease in aggregate demand, hence a leftward shift of the aggregate demand curve. Choices A and B would typically cause a rightward shift, and C does not directly cause the aggregate demand curve to shift (it affects aggregate supply conditions).

Question 17

Suppose the price level rises.How would this affect the aggregate expenditure line and the aggregate demand curve?

Accepted Answer

When the price level rises, the aggregate expenditure line shifts downward because higher prices reduce consumption and investment. Consequently, the economy moves upward along the aggregate demand curve as the quantity of goods and services demanded decreases.

Question 18

Suppose that a pair of graphs represents a situation in which the aggregate expenditure line has shifted but the aggregate demand curve has NOT.What change will cause the aggregate expenditure line to shift?

Accepted Answer

The answer of Suppose that a pair of graphs represents...

Question 19

What is the effect of a decrease in the price level?

Accepted Answer

A decrease in the price level will lead to a decrease in the cost of goods and services, leading to an increase in the quantity demanded. This will cause movement along a particular aggregate demand curve, leading to a downward movement. The other options are incorrect, as a decrease in the price level will not lead to a downward shift in the aggregate expenditure line, but rather a movement along it, and it will not lead to a fall in the equilibrium level of output demanded or a leftward shift in aggregate demand curve.

Question 20

What is the effect of a decrease in the price level?

Accepted Answer

The answer of What is the effect of a decrease...

Quiz 10: Aggregate Expenditure and Aggregate Demand

Suppose the price level decreases.How will aggregate demand be affected?

How will a rise in the price level affect the aggregate expenditure curve and the aggregate demand curve?

How would an increase in the Canadian price level, other things constant, affect imports and exports?

Suppose the price level increases.Other things constant, will consumption spending increase or decrease?

Suppose the price level decreases.How will the aggregate expenditure line and the aggregate demand curve be affected?

Which of the following would cause a rightward shift of the aggregate demand curve?

How will a decrease in the price level affect the aggregate demand curve?

How will an increase in the price level affect the aggregate demand curve?

What would be the effect of a decrease in the price level?

How will an increase in the price level affect the aggregate expenditure line?

How will a decrease in the price level affect the aggregate demand curve?

How will a decrease in the price level affect the aggregate expenditure line?

Which of the following would be an effect of a decline in the Canadian price level, other things constant?

Suppose the price level decreases.Other things constant, will people consume more or less?

Suppose the Canadian price level rises relative to price levels in other countries.How would Canada's consumption and exports be affected?

Which of the following would cause a leftward shift of the aggregate demand curve?

Suppose the price level rises.How would this affect the aggregate expenditure line and the aggregate demand curve?

Suppose that a pair of graphs represents a situation in which the aggregate expenditure line has shifted but the aggregate demand curve has NOT.What change will cause the aggregate expenditure line to shift?

What is the effect of a decrease in the price level?

What is the effect of a decrease in the price level?