This quiz works best with JavaScript enabled. Home > Economics > Macroeconomics > Aggregate > Aggregate Demand – Quiz 8 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Aggregate Demand Quiz 8 (30 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. On account of an injection of aggregate demand, equilibrium level of income A) Increases. B) Decreases. C) Remains constant. D) None of these. Show Answer Correct Answer: A) Increases. 2. Revenue and expenditure policy of the government to correct the situations of excess and deficient demand is known as: A) Monetary policy. B) Fiscal policy. C) Both (a) and(b). D) None of these. Show Answer Correct Answer: B) Fiscal policy. 3. The Phillips curve indicates that when the labor market is ....., production costs will ..... and aggregate supply increases. A) Easy; fall. B) Tight; fall. C) Easy; rise. D) Tight; rise. Show Answer Correct Answer: A) Easy; fall. 4. Which of the below events would not shift the AD curve? A) A change in the general price level. B) An increase in income tax rates. C) A fall in the value of the currency. D) Higher interest rates. Show Answer Correct Answer: A) A change in the general price level. 5. Which of the following will lead to a fall in consumption? A) Increased income. B) Low interest rate. C) High private sector debt. D) Low inflation. Show Answer Correct Answer: C) High private sector debt. 6. A decline in investment will shift the AD curve to the: A) Left by a multiple of the change in investment. B) Right by a multiple of the change in investment. C) Right by the same amount as the change in investment. D) Left by the same amount as the change in investment. Show Answer Correct Answer: A) Left by a multiple of the change in investment. 7. When the government spends more, the effect is that A) Aggregate demand shifts right. B) Aggregate demand shifts left. C) Aggregate supply shifts right. D) Aggregate supply shifts left. Show Answer Correct Answer: A) Aggregate demand shifts right. 8. If income increases from 2500 to 3900 and autonomous investment increases by 350, the MPC should be A) .75. B) 0.8. C) 0.9. D) 0.6. Show Answer Correct Answer: A) .75. 9. Stagflation occurs when the economy experiences A) Rising prices and rising output. B) Rising prices and falling output. C) Falling prices and falling output. D) Falling prices and rising output. Show Answer Correct Answer: B) Rising prices and falling output. 10. The wealth effect states that higher prices ..... the purchasing power or the real value of the nation's households' wealth and savings. A) Stagnate. B) Reduce. C) Increase. D) Double. Show Answer Correct Answer: B) Reduce. 11. If MPS (Marginal Propensity to Save) is significant, what is most likely to happen to the AD curve with an increase in income? A) No change. B) Shift left. C) Shift right. D) None of above. Show Answer Correct Answer: B) Shift left. 12. What is a positive multiplier? A) Initial injection causes greater final increase in real GDP. B) Decrease in an injection to increase wealth. C) An injection causes a decrease in real GDP. D) Increase in leakage leading to an increase in real GDP. Show Answer Correct Answer: A) Initial injection causes greater final increase in real GDP. 13. When taxes decrease, consumption A) Increases, so aggregate demand shifts right. B) Increases, so aggregate supply shifts right. C) Decreases, so aggregate demand shifts left. D) Decreases, as aggregate supply shifts left. Show Answer Correct Answer: A) Increases, so aggregate demand shifts right. 14. In the AS/AD model, which causes a rightward shift of LRAS? A) Increased population and productivity. B) Increased consumption. C) Increased government transfers. D) Decreased taxes. Show Answer Correct Answer: A) Increased population and productivity. 15. The construction of new residential housing is an example of A) Government spending. B) Investment expenditure. C) Consumer expenditure. D) Net Exports. Show Answer Correct Answer: B) Investment expenditure. 16. Which one of the following is most likely to lead to a fall in aggregate investment? A) A reduction in the level of unemployment. B) An increase in spare capacity in the economy. C) A reduction in the average level of interest rates. D) An increase in aggregate demand. Show Answer Correct Answer: B) An increase in spare capacity in the economy. 17. Which of the following is not a shift factor for SRAS? A) Input Prices. B) Productivity. C) Investment. D) Resource Cost. Show Answer Correct Answer: C) Investment. 18. Prices and wages tend to be: A) Flexible both upward and downward. B) Inflexible both upward and downward. C) Flexible downward, but inflexible upward. D) Flexible upward, but inflexible downward. Show Answer Correct Answer: D) Flexible upward, but inflexible downward. 19. Assume MPC is 2/3. If investment spending increases by $ 2 billion, GDP will increase by A) $ 2/3 billion. B) $ 6 billion. C) $ 3 billion. D) $ 2 billion. Show Answer Correct Answer: B) $ 6 billion. 20. When the general level of prices is high, the level of AD tends to be A) Stable. B) High. C) ~Unchanged. D) Low. Show Answer Correct Answer: D) Low. 21. In the short run, an increase in the costs of production makes A) Output and prices rise. B) Output rise and prices fall. C) Output fall and prices rise. D) Output and prices fall. Show Answer Correct Answer: C) Output fall and prices rise. 22. If you receive $ 100 and save $ 25 A) MPC = .75. B) MPC = .25. C) MPS = .25. D) MPS = .75. Show Answer Correct Answer: B) MPC = .25. 23. The vertical part of the Keynesian AS curve is called: A) The Keynesian Range. B) The Classical Range. C) The Aggregate Demand Range. D) The Intermediate Range. Show Answer Correct Answer: B) The Classical Range. 24. Equilibrium level of income/output and employment is viewed from which of the following approaches? A) AS = AD approach. B) S = I approach. C) Both (a) and (b). D) None of these. Show Answer Correct Answer: C) Both (a) and (b). 25. International competitiveness for the UK increases when ..... A) Relative prices of exports fall in world markets. B) Relative prices of exports increase in world markets. C) Supply side policies are ineffective. D) The value of the £ increases. Show Answer Correct Answer: A) Relative prices of exports fall in world markets. 26. The MPC and MPS are equal to each other because: A) You can only save as much as you consume. B) You can only save money or spend it. C) You can only consume as much as you save. D) It's the law of economics. Show Answer Correct Answer: B) You can only save money or spend it. 27. How much is MPS in an economy when MPC is .8? A) 1.6. B) 3. C) .8. D) .2. Show Answer Correct Answer: D) .2. 28. Level of federal borrowing makes it more difficult for private businesses to borrow. A) Excess reserves. B) Crowding out effect. C) Required reserves. D) Fiscal policy. Show Answer Correct Answer: B) Crowding out effect. 29. The multiplier is useful in determining: A) Level of business inventories. B) Change in GDP resulting from a change in spending. C) Rate of inflation. D) The full employment rate. Show Answer Correct Answer: B) Change in GDP resulting from a change in spending. 30. The Aggregate demand curve shows the A) RNO that is purchased at each PL, per time period. B) Positive correlation between NO and the general PL. C) NNO that is purchased at each PL, per time period. D) Negative correlation between production costs and RNO. Show Answer Correct Answer: A) RNO that is purchased at each PL, per time period. ← PreviousNext →Related QuizzesMacroeconomics QuizzesEconomics QuizzesAggregate Demand Quiz 1Aggregate Demand Quiz 2Aggregate Demand Quiz 3Aggregate Demand Quiz 4Aggregate Demand Quiz 5Aggregate Demand Quiz 6Aggregate Demand Quiz 7Aggregate Demand Quiz 9 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books