This quiz works best with JavaScript enabled. Home > Economics > Macroeconomics > Aggregate > Aggregate Demand – Quiz 2 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Aggregate Demand Quiz 2 (30 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. An increase in the marginal propensity to save clearly causes a decrease in which of the following? A) Exports. B) Marginal propensity to consume. C) Aggregate supply. D) Simple spending multiplier. Show Answer Correct Answer: D) Simple spending multiplier. 2. Illustrate the effect of the following on LRAS diagrams.A rise in net immigration A) Increase LRAS. B) Decrease LRAS. C) No changes to LRAS. D) None of above. Show Answer Correct Answer: A) Increase LRAS. 3. The initial impact of an increase in government spending is to shift A) Aggregate supply to the right. B) Aggregate supply to the left. C) Aggregate demand to the right. D) Aggregate demand to the left. Show Answer Correct Answer: C) Aggregate demand to the right. 4. Improvement in productivity will A) Shift the aggregate demand curve to the left. B) Shift the aggregate supply curve to the right. C) Shift the aggregate supply curve to the left. D) Increase the price level. Show Answer Correct Answer: B) Shift the aggregate supply curve to the right. 5. What would cause AD to decrease? A) Keeping government spending constant. B) A decrease taxes. C) An increase in taxes. D) An increase in government spending. Show Answer Correct Answer: C) An increase in taxes. 6. Increases in AD tend to cause: A) The price level to increase. B) Real GDP to decrease. C) The unemployment rate to increase. D) All of the above. Show Answer Correct Answer: A) The price level to increase. 7. If the MPC is .7 and gross investment spending increase by $ 3 billion, GDP will A) Decrease by $ 4.29 billion. B) Increase by 2.1 billion. C) Increase by $ 4.29 billion. D) Increase by $ 10 billion. Show Answer Correct Answer: D) Increase by $ 10 billion. 8. An economy's aggregate demand curve shifts leftward or rightward by more than changes in initial spending because of the A) Multiplier effect. B) Wealth effect. C) Net export effect. D) Real-balances effect. Show Answer Correct Answer: A) Multiplier effect. 9. Spending on public road networks in an economy is an example of A) Net exports. B) Investment expenditure. C) Consumer expenditure. D) Government spending. Show Answer Correct Answer: D) Government spending. 10. What does the vertical axis represent on the aggregate demand curve? A) Total Input. B) Total Output. C) Price Level. D) Both A&B. Show Answer Correct Answer: C) Price Level. 11. Which of the following will cause an increase in consumption? A) An increase in interest rates. B) A decrease in taxes. C) An increase in stock prices. D) Both b. and c. above. Show Answer Correct Answer: D) Both b. and c. above. 12. An increase of prices lead to A) An outward shift of the AD curve. B) An inward shift of the AD curve. C) A change along the AD curve to the right. D) A change along the AD curve to the left. Show Answer Correct Answer: D) A change along the AD curve to the left. 13. Consider the consumption function C = Ca + bY. Which part of this function is called the autonomous consumption spending? A) Ca. B) BY. C) Ca + bY. D) B. Show Answer Correct Answer: A) Ca. 14. When Aggregate Supply(AS) is highly elastic, the multiplier is likely to be ..... A) Equal to AS. B) Low. C) Unchanged. D) High. Show Answer Correct Answer: D) High. 15. Which of the following shifts aggregate demand to the right? A) An increase in government spending. B) An increase in net exports. C) An investment increase. D) All of the above are correct. Show Answer Correct Answer: D) All of the above are correct. 16. Investment is the purchase of ..... A) Capital goods. B) Capital and consumer goods. C) Consumer goods. D) Neither consumer or capital goods. Show Answer Correct Answer: A) Capital goods. 17. Increase in consumption owing to increase in income leads to: A) Movement along AD curve. B) An upward shift in AD curve. C) A downward shift in AD curve. D) None of these. Show Answer Correct Answer: A) Movement along AD curve. 18. Contractionary policy tries to fix the problem of ..... A) Stagflation. B) Demand-pull inflation. C) Cost-push inflation. D) Success. Show Answer Correct Answer: B) Demand-pull inflation. 19. The immediate-short-run aggregate supply curve is A) Upsloping. B) Horizontal. C) Downsloping. D) Vertical. Show Answer Correct Answer: B) Horizontal. 20. An increase in the marginal propensity to consume causes an increase in which of the following? A) Marginal propensity to saave. B) Marginal propensity to consume. C) Spending multiplier. D) Tax multiplier. Show Answer Correct Answer: C) Spending multiplier. 21. Suppose the short run aggregate supply of an economy decreases while the long run aggregate supply remains unchanged. This may be caused by A) An increase in population. B) A decrease in profits tax rate. C) A decrease in investment. D) An increase in labour cost. Show Answer Correct Answer: D) An increase in labour cost. 22. When will the multiplier effect be large? A) The marginal rate of tax on extra income is low. B) Businesses in economy cannot expand production in short run. C) Propensity to spend extra income is low. D) Consumer confidence is low. Show Answer Correct Answer: A) The marginal rate of tax on extra income is low. 23. Aggregate demand would shift right if A) Price Level decreased, or government expenditures increased. B) Price Level decreases, or government instituted a tax credit. C) Government expenditures increase, or government instituted a tax credit. D) None of above. Show Answer Correct Answer: C) Government expenditures increase, or government instituted a tax credit. 24. Which of the following does NOT shift the AD curve? A) Investment Spending. B) Government Spending. C) Net Exports. D) Long run aggregate supply. Show Answer Correct Answer: D) Long run aggregate supply. 25. In the AS/AD model, which curve is vertical? A) RGDP. B) LRAS. C) AD. D) SRAS. Show Answer Correct Answer: B) LRAS. 26. If the government lowers taxes and increases spending, this is likely to lead to ..... inflation A) Public-pushed. B) Demand-pulled. C) Cost-pushed. D) Hyperinflation. Show Answer Correct Answer: B) Demand-pulled. 27. The aggregate supply curve shows the relationship between A) The inflation rate and the level of aggregate output supplied. B) The inflation rate and the level of inputs. C) The wage rate and the level of employment. D) The level of inputs and aggregate output. Show Answer Correct Answer: A) The inflation rate and the level of aggregate output supplied. 28. Which is NOT a drawback of increased consumption? A) Removing goods away from the export market. B) Worsening of trade balance. C) Inflation. D) A possible multiplier effect. Show Answer Correct Answer: D) A possible multiplier effect. 29. An increase in the marginal propensity to consume (MPC) A) Lowers the value of the multiplier. B) Has no impact on the value of the multiplier. C) Raises the value of the multiplier. D) Rarely occurs because the MPC is set by congressional legislation. Show Answer Correct Answer: C) Raises the value of the multiplier. 30. What is represented on the "X" axis on the AS graph? A) Price level. B) Real GDP. C) Price. D) Nominal GDP. Show Answer Correct Answer: B) Real GDP. ← PreviousNext →Related QuizzesMacroeconomics QuizzesEconomics QuizzesAggregate Demand Quiz 1Aggregate 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