This quiz works best with JavaScript enabled. Home > Macroeconomics > Aggregate > Aggregate Demand – Quiz 1 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Aggregate Demand Quiz 1 (20 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) Average output per unit of labor. B) Average input per unit of labor. C) Overage output per capita. D) Average output per unit of currency. Show Answer Correct Answer: A) 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) Marginal Propensity to Consume. B) Marginal Propensity to Save. C) Average Propensity to Save. D) Average Propensity to Consume. Show Answer Correct Answer: A) 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) Increase the price level. B) Decrease the price level. C) Increase the interest rate. D) Decrease the interest rate. Show Answer Correct Answer: D) 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 X will import less from Z, its AD curve shifts left. B) Country Z will export more to country X. C) Country Z will be unaffected. D) Country X will stop exporting to country Z. Show Answer Correct Answer: A) 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) Taxes. B) Public goods. C) Spending on subsidies. D) Merit goods. Show Answer Correct Answer: A) 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) Curve shifts left. B) No change in curve. C) Curve slopes up. D) Curve shifts right. Show Answer Correct Answer: A) 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 fiscal policy. B) Tight monetary policy. C) Loose monetary policy. D) Loose fiscal policy. Show Answer Correct Answer: D) 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 nominal wage rate of labour. B) An increase in foreign direct investment. C) An increase in the education level of the general public. D) An enhancement in production technology. Show Answer Correct Answer: A) An increase in the nominal wage rate of labour. 20. In the UK, investment accounts for ..... of GDP A) 15%. B) 29%. C) 10%. D) 72%. Show Answer Correct Answer: A) 15%. 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