This quiz works best with JavaScript enabled. Home > Economics > Macroeconomics > Aggregate > Aggregate Demand – Quiz 3 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Aggregate Demand Quiz 3 (30 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. The bigger MPC ..... A) The bigger MPS. B) The smaller MPT. C) The bigger the initial shift in AD. D) The bigger the multiplier. Show Answer Correct Answer: D) The bigger the multiplier. 2. Which of the following will increase consumption? A) A negative wealth effect. B) High taxation. C) High unemployment. D) Increased consumer confidence. Show Answer Correct Answer: D) Increased consumer confidence. 3. Which of the following is a disadvantage of the multiplier effect? A) It increases government intervention. B) It causes a decrease in aggregate supply. C) There is a time lag. D) It increases protectionism. Show Answer Correct Answer: C) There is a time lag. 4. If MPC = 0, the multiplier will be: A) $ \infty$. B) 0. C) 2. D) 1. Show Answer Correct Answer: D) 1. 5. Which of the following is NOT the reason for the AD curve to be downward sloping? A) The international trade effect. B) The wealth effect. C) The political priorities effect. D) The interest rate effect. Show Answer Correct Answer: C) The political priorities effect. 6. If consumption spending totals $ 40 million, investment is $ 30 million, tax revenue totals $ 15 million, government spending is $ 10 million, exports are $ 3 million and imports are $ 5 million, GDP is ..... A) $ 93 million. B) $ 80 million. C) $ 78 million. D) $ 103 million. Show Answer Correct Answer: C) $ 78 million. 7. What is the vertical line called on the AD/AS Model? A) Short-run aggregate supply. B) Aggregate demand. C) Long run aggregate supply. D) R GDP. Show Answer Correct Answer: C) Long run aggregate supply. 8. A positive impact on consumption could be due to A) Better funding conditions. B) Higher interest rates. C) Higher tariffs abroad. D) None of above. Show Answer Correct Answer: A) Better funding conditions. 9. Which of the following equations represents Aggregate Demand A) GDP = X + I + C + (Y-Z). B) GDP = C + I + G + (X-M). C) GDP = (1/MPS)*G + I + C. D) GDP = C + I + X + (G-T). Show Answer Correct Answer: B) GDP = C + I + G + (X-M). 10. The nation of Mordor sees an increase in exports to other nations. This should result in: A) An increase in unemployment in Mordor. B) An decrease in aggregate demand in Mordor. C) An increase in aggregate demand in Mordor. D) A decrease in the price level in Mordor. Show Answer Correct Answer: C) An increase in aggregate demand in Mordor. 11. Changes in foreigners' spending will arise from which of the following factors? A) Changes in political priorities. B) Changes in exchange rates. C) Changes in interest rates. D) Changes in wealth. Show Answer Correct Answer: B) Changes in exchange rates. 12. Which is NOT a benefit of increased consumption? A) Increased private sector debt. B) Reduced unemployment benefit payments and increased tax base. C) Firms profits increase. D) Increases demand for UK firms' products. Show Answer Correct Answer: A) Increased private sector debt. 13. If workers demand and receive higher real wages (a successful wage push), the cost of production ..... and the short-run aggregate supply curve shifts ..... A) Rises; leftward. B) Rises; rightward. C) Falls; leftward. D) Falls; rightward. Show Answer Correct Answer: A) Rises; leftward. 14. Average propensity to consume is equal to: A) $ \frac{Y}{C}$. B) $ \frac{\Delta C}{\Delta Y}$. C) $ \frac{C}{Y}$. D) $ \frac{\Delta Y}{\Delta C}$. Show Answer Correct Answer: C) $ \frac{C}{Y}$. 15. Aggregate demand shifts left when the government A) Decreases taxes. B) Cuts military expenditures. C) Both of the above are correct. D) None of the above is correct. Show Answer Correct Answer: B) Cuts military expenditures. 16. Positive net exports lead to ..... A) A trade surplus and shifts AD right. B) A trade surplus and shifts AD left. C) A trade deficit and shifts AD left. D) A trade deficit and shifts AD right. Show Answer Correct Answer: A) A trade surplus and shifts AD right. 17. An Economy's AD demand measures A) The total Value of all G and S demanded in the economy. B) The total Q of G and S Produced in the economy. C) The total Q of G and S demanded in the economy. D) The total value of all Producer and Consumer surplus in econ. Show Answer Correct Answer: A) The total Value of all G and S demanded in the economy. 18. Which of the following can fix an inflationary gap? A) A decrease in aggregate demand. B) A decrease in aggregate supply. C) An increase in the money supply. D) An increase in government spending. Show Answer Correct Answer: A) A decrease in aggregate demand. 19. The increase in spending that occurs because the real value of money increases when the price level falls is called A) The wealth effect. B) The interest rate effect. C) The income effect. D) The foreign trade effect. Show Answer Correct Answer: A) The wealth effect. 20. The long run aggregate supply curve is also known as A) Cyclical unemployment. B) The natural rate of unemployment. C) Full-employment. D) The natural rate of employment. Show Answer Correct Answer: C) Full-employment. 21. Decreases in SRAS tend to cause: A) The price level to decrease. B) Real GDP to decrease. C) The unemployment rate to increase. D) Both b. and c. above. Show Answer Correct Answer: D) Both b. and c. above. 22. Which of the following will shift the short-run aggregate supply curve to the right? A) An economy-wide decrease in commodity prices. B) An increase in nominal wages. C) A decrease in productivity. D) A decrease in government purchases of goods and services. Show Answer Correct Answer: A) An economy-wide decrease in commodity prices. 23. The Keynesian AS curve range where it is impossible to increase output any further because the factors of production are fully employed. A) This definition does not apply to any of the ranges. B) The Intermediate Range. C) The Keynesian Range. D) The Classical Range. Show Answer Correct Answer: D) The Classical Range. 24. Multiplier is estimated as: A) $ \frac{1}{MPC}$. B) $ \frac{1}{1\ +\ MPC}$. C) $ \frac{1}{1\-\ MPC}$. D) $ \frac{1}{1\-\ MPS}$. Show Answer Correct Answer: C) $ \frac{1}{1\-\ MPC}$. 25. Graphically, cost-push inflation is shown as a: A) Leftward shift of the AD curve. B) Rightward shift of the AD curve. C) Rightward shift of the AS curve. D) Leftward shift of AS curve. Show Answer Correct Answer: D) Leftward shift of AS curve. 26. The level of disposable income determines the level of ..... A) Private expenditure. B) Government expenditure. C) Consumption expenditure. D) Net export. Show Answer Correct Answer: C) Consumption expenditure. 27. Which of the following indicates AD in an open economy A) Govt. expenditure + private consumption expenditure. B) Household investment expenditure. C) Household expend+ private investment expend +govt expend + net exports. D) Private household consumption expenditure. Show Answer Correct Answer: C) Household expend+ private investment expend +govt expend + net exports. 28. What is an inflationary gap? A) When output goes beyond full employment. B) When output falls below full employment. C) When unemployment increases. D) When deflation is present in an economy. Show Answer Correct Answer: A) When output goes beyond full employment. 29. If MPC is greater than MPS, the value of the multiplier will be A) Equal to 5. B) Less than 2. C) Equal to 2. D) Greater than 2. Show Answer Correct Answer: D) Greater than 2. 30. Which of the following is not a component of aggregate demand in a two-sector economy? A) Consumption. B) Government expenditure. C) Investment. D) None of above. Show Answer Correct Answer: B) Government expenditure. ← PreviousNext →Related QuizzesMacroeconomics QuizzesEconomics QuizzesAggregate Demand Quiz 1Aggregate Demand Quiz 2Aggregate 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