Aggregate Demand Quiz 2 (20 MCQs)

Quiz Instructions

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1. At the end of WWII many countries were rebuilding. The rebuilding increased AD in

Correct Answer: A) Both the US & Europe.

2. Aggregate demand shifts right when the government

Correct Answer: D) All of the above are correct.

3. When the AD curve for an economy shifts rightwards

Correct Answer: A) National output increases at all price levels.

4. Which of the following is not a reason why the aggregate demand curve slopes downward?

Correct Answer: C) The classical dichotomy/monetary neutrality effects.

5. Which of the following is not true about AD in a two-sector economy?

Correct Answer: A) AD= consumption + saving.

6. An increase in productivity will tend to cause:

Correct Answer: D) All of the above.

7. Increased levels of spending on imports:

Correct Answer: D) Shift aggregate demand to the left.

8. An economy experiencing stagflation is said to have?

Correct Answer: C) High price levels with low rates of employment.

9. Break-even point occurs when:

Correct Answer: D) Both (b) and (c).

10. A strong rise in energy cost is likely to lead to

Correct Answer: C) A fall in real GDP but a rise in the price level.

11. An increase in the marginal propensity to save clearly causes a decrease in which of the following?

Correct Answer: C) Simple spending multiplier.

12. Illustrate the effect of the following on LRAS diagrams.A rise in net immigration

Correct Answer: A) Increase LRAS.

13. The initial impact of an increase in government spending is to shift

Correct Answer: C) Aggregate demand to the right.

14. Improvement in productivity will

Correct Answer: B) Shift the aggregate supply curve to the right.

15. What would cause AD to decrease?

Correct Answer: A) An increase in taxes.

16. Increases in AD tend to cause:

Correct Answer: A) The price level to increase.

17. If the MPC is .7 and gross investment spending increase by $ 3 billion, GDP will

Correct Answer: A) Increase by $ 10 billion.

18. An economy's aggregate demand curve shifts leftward or rightward by more than changes in initial spending because of the

Correct Answer: D) Multiplier effect.

19. Spending on public road networks in an economy is an example of

Correct Answer: A) Government spending.

20. Since AS = C + I, the equilibrium will be established where C+S = C +I, or where

Correct Answer: A) S= I.