This quiz works best with JavaScript enabled. Home > Macroeconomics > Aggregate > Aggregate Demand – Quiz 3 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Aggregate Demand Quiz 3 (20 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. 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. 2. 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. 3. An increase of prices lead to A) A change along the AD curve to the right. B) An outward shift of the AD curve. C) An inward shift of the AD curve. D) A change along the AD curve to the left. Show Answer Correct Answer: D) A change along the AD curve to the left. 4. Consider the consumption function C = Ca + bY. Which part of this function is called the autonomous consumption spending? A) Ca. B) B. C) BY. D) Ca + bY. Show Answer Correct Answer: A) Ca. 5. When Aggregate Supply(AS) is highly elastic, the multiplier is likely to be ..... A) High. B) Low. C) Equal to AS. D) Unchanged. Show Answer Correct Answer: A) High. 6. 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. 7. 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. 8. 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. 9. 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. 10. The immediate-short-run aggregate supply curve is A) Downsloping. B) Upsloping. C) Vertical. D) Horizontal. Show Answer Correct Answer: D) Horizontal. 11. An increase in the marginal propensity to consume causes an increase in which of the following? A) Marginal propensity to consume. B) Marginal propensity to saave. C) Tax multiplier. D) Spending multiplier. Show Answer Correct Answer: D) Spending multiplier. 12. Suppose the short run aggregate supply of an economy decreases while the long run aggregate supply remains unchanged. This may be caused by A) A decrease in investment. B) A decrease in profits tax rate. C) An increase in labour cost. D) An increase in population. Show Answer Correct Answer: C) An increase in labour cost. 13. 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. 14. 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. 15. Which of the following does NOT shift the AD curve? A) Government Spending. B) Investment Spending. C) Long run aggregate supply. D) Net Exports. Show Answer Correct Answer: C) Long run aggregate supply. 16. In the AS/AD model, which curve is vertical? A) AD. B) SRAS. C) LRAS. D) RGDP. Show Answer Correct Answer: C) LRAS. 17. 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. 18. 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. 19. Which is NOT a drawback of increased consumption? A) A possible multiplier effect. B) Removing goods away from the export market. C) Worsening of trade balance. D) Inflation. Show Answer Correct Answer: A) A possible multiplier effect. 20. An increase in the marginal propensity to consume (MPC) A) Raises the value of the multiplier. B) Lowers the value of the multiplier. C) Has no impact on the value of the multiplier. D) Rarely occurs because the MPC is set by congressional legislation. Show Answer Correct Answer: A) Raises the value of the multiplier. ← PreviousNext →Related QuizzesMacroeconomics QuizzesAggregate Demand Quiz 1Aggregate Demand Quiz 2Aggregate Demand Quiz 4Aggregate Demand Quiz 5Aggregate Demand Quiz 6Aggregate Demand Quiz 7Aggregate Demand Quiz 8Aggregate Demand Quiz 9Aggregate Demand Quiz 10 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books