This quiz works best with JavaScript enabled. Home > Economics > Macroeconomics > Aggregate > Aggregate Demand – Quiz 1 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Aggregate Demand Quiz 1 (30 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. What causes the movement along the AD curve? A) Changes in the price level. B) The determinents of aggregate demand. C) Changes in the quantity of output demanded. D) Chnages in legal and political policies. Show Answer Correct Answer: A) Changes in the price level. 2. An increase in government spending on infrastructure will most likely lead to an increase in(1) aggregate demand.(2) the short run aggregate supply.(3) the long run aggregate supply. A) (1) and (2) only. B) (1) and (3) only. C) (2) and (3) only. D) (1), (2) and (3). Show Answer Correct Answer: D) (1), (2) and (3). 3. Productivity is best described as A) Overage output per capita. B) Average output per unit of currency. C) Average input per unit of labor. D) Average output per unit of labor. Show Answer Correct Answer: D) Average output per unit of labor. 4. The long-run aggregate supply analysis assumes that A) Input prices are fixed, while product prices are variable. B) Input prices are variable, while product prices are fixed. C) Both input and product prices are variable. D) Both input and product prices are fixed. Show Answer Correct Answer: C) Both input and product prices are variable. 5. How much people consume rather than save when there is a change in income A) Average Propensity to Consume. B) Marginal Propensity to Save. C) Marginal Propensity to Consume. D) Average Propensity to Save. Show Answer Correct Answer: C) Marginal Propensity to Consume. 6. Positive spending shocks lead to ..... output ..... A) Higher; in both the short and long runs. B) Higher; in the short run but not in the long run. C) Lower; in both the short and long runs. D) Lower; in the short run but not in the long run. Show Answer Correct Answer: B) Higher; in the short run but not in the long run. 7. The initial effect of an increase in the money supply is to A) Decrease the price level. B) Increase the interest rate. C) Decrease the interest rate. D) Increase the price level. Show Answer Correct Answer: C) Decrease the interest rate. 8. Natural unemployment occurs due to: A) Shortage of factors of production. B) Time required in adjusting to change in technology. C) Time required in shifting from one job to the other. D) Both (b) and (c). Show Answer Correct Answer: D) Both (b) and (c). 9. If countries X and Z are trading countries, and country Z's currency appreciates relative to Xs A) Country Z will be unaffected. B) Country X will stop exporting to country Z. C) Country X will import less from Z, its AD curve shifts left. D) Country Z will export more to country X. Show Answer Correct Answer: C) Country X will import less from Z, its AD curve shifts left. 10. The real interest rate is ..... A) Nominal interest rate-inflation rate. B) Nominal interest rate + inflation rate. C) Inflation rate-nominal interest rate. D) None of above. Show Answer Correct Answer: A) Nominal interest rate-inflation rate. 11. Changes in political priorities do NOT arise from provision of ..... A) Spending on subsidies. B) Merit goods. C) Taxes. D) Public goods. Show Answer Correct Answer: C) Taxes. 12. Keynes's liquidity preference theory of the interest rate suggests that the interest rate is determined by A) The supply and demand for loanable funds. B) The supply and demand for money. C) The supply and demand for labor. D) Aggregate supply and aggregate demand. Show Answer Correct Answer: B) The supply and demand for money. 13. Other things equal, an increase in the money supply will: A) Cause a movement along a given AD curve. B) Shift the AD curve to the right. C) Shift the AD curve to the left. D) None of above. Show Answer Correct Answer: B) Shift the AD curve to the right. 14. The expectations-augmented Phillips curve implies that as expected inflation increases, nominal wages ..... to prevent real wages from ..... A) Rise; rising. B) Rise; falling. C) Fall; falling. D) Fall; rising. Show Answer Correct Answer: B) Rise; falling. 15. What will generally happen to the aggregate demand curve when consumer confidence decreases? A) No change in curve. B) Curve slopes up. C) Curve shifts left. D) Curve shifts right. Show Answer Correct Answer: C) Curve shifts left. 16. Other factors remaining equal, a high savings ratio will ..... A) Lower consumption and increases aggregate demand. B) Lower consumption and lowers aggregate demand. C) Increase consumption and increases aggregate demand. D) Increase consumption and lowers aggregate demand. Show Answer Correct Answer: A) Lower consumption and increases aggregate demand. 17. Increasing government spending to stimulate the economy is called: A) Tight monetary policy. B) Loose fiscal policy. C) Tight fiscal policy. D) Loose monetary policy. Show Answer Correct Answer: B) Loose fiscal policy. 18. When the interest rate increases, A) The AD curve will shift to the right. B) The AD curve will shift to the left. C) Both the AD curve and the SRAS curve will shift to the right. D) Both the AD curve and the SRAS curve will shift to the left. Show Answer Correct Answer: B) The AD curve will shift to the left. 19. All of the following lead to a shift of the LRAS curve EXCEPT A) An increase in the education level of the general public. B) An increase in the nominal wage rate of labour. C) An increase in foreign direct investment. D) An enhancement in production technology. Show Answer Correct Answer: B) An increase in the nominal wage rate of labour. 20. In the UK, investment accounts for ..... of GDP A) 72%. B) 10%. C) 15%. D) 29%. Show Answer Correct Answer: C) 15%. 21. At the end of WWII many countries were rebuilding. The rebuilding increased AD in A) Both the US & Europe. B) The USA but not Europe. C) Europe, but not the USA. D) Neither the USA, nor Europe. Show Answer Correct Answer: A) Both the US & Europe. 22. Aggregate demand shifts right when the government A) Lowers personal income taxrs. B) Increases the money supply. C) Repeals an investment tax credit. D) All of the above are correct. Show Answer Correct Answer: D) All of the above are correct. 23. When the AD curve for an economy shifts rightwards A) National output increases at all price levels. B) Net exports rise. C) Inflation will occur. D) Interest rates get raised. Show Answer Correct Answer: A) National output increases at all price levels. 24. Which of the following is not a reason why the aggregate demand curve slopes downward? A) The exchange-rate effect. B) The classical dichotomy/monetary neutrality effects. C) The interest-rate effect. D) The wealth effect. Show Answer Correct Answer: B) The classical dichotomy/monetary neutrality effects. 25. Which of the following is not true about AD in a two-sector economy? A) AD= consumption + saving. B) AD curve starts from some point above the origin. C) AD=consumption + investment. D) AD curve has a positive slope. Show Answer Correct Answer: A) AD= consumption + saving. 26. An increase in productivity will tend to cause: A) The price level to decrease. B) Real GDP to increase. C) The unemployment rate to decrease. D) All of the above. Show Answer Correct Answer: D) All of the above. 27. Increased levels of spending on imports: A) Shift aggregate supply to the right. B) Shift aggregate supply to the left. C) Shift aggregate demand to the right. D) Shift aggregate demand to the left. Show Answer Correct Answer: D) Shift aggregate demand to the left. 28. An economy experiencing stagflation is said to have? A) High price levels with low rates of employment. B) High price levels with low rates of unemployment. C) Low price levels with high rates of unemployment. D) Low price levels with high rates of employment. Show Answer Correct Answer: A) High price levels with low rates of employment. 29. Break-even point occurs when: A) Y = S. B) S = 0. C) Y = C. D) Both (b) and (c). Show Answer Correct Answer: D) Both (b) and (c). 30. A strong rise in energy cost is likely to lead to A) A rise in real GDP and the price level. B) A fall in GDP and the price level. C) A fall in real GDP but a rise in the price level. D) A rise in real GDP but a fall in the price level. Show Answer Correct Answer: C) A fall in real GDP but a rise in the price level. Next →Related QuizzesMacroeconomics QuizzesEconomics QuizzesAggregate Demand Quiz 2Aggregate Demand Quiz 3Aggregate Demand Quiz 4Aggregate Demand Quiz 5Aggregate Demand Quiz 6Aggregate Demand Quiz 7Aggregate Demand Quiz 8Aggregate Demand Quiz 9 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books