This quiz works best with JavaScript enabled. Home > Macroeconomics > Aggregate > Aggregate Demand – Quiz 5 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Aggregate Demand Quiz 5 (20 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. 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. 2. 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 foreign trade effect. D) The income effect. Show Answer Correct Answer: A) The wealth effect. 3. The long run aggregate supply curve is also known as A) The natural rate of unemployment. B) Full-employment. C) The natural rate of employment. D) Cyclical unemployment. Show Answer Correct Answer: B) Full-employment. 4. 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. 5. 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. 6. The Keynesian AS curve range where it is impossible to increase output any further because the factors of production are fully employed. A) The Keynesian Range. B) The Intermediate Range. C) The Classical Range. D) This definition does not apply to any of the ranges. Show Answer Correct Answer: C) The Classical Range. 7. 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: B) $ \frac{1}{1\-\ MPC}$. 8. Graphically, cost-push inflation is shown as a: A) Leftward shift of the AD curve. B) Rightward shift of the AS curve. C) Leftward shift of AS curve. D) Rightward shift of the AD curve. Show Answer Correct Answer: C) Leftward shift of AS curve. 9. The level of disposable income determines the level of ..... A) Consumption expenditure. B) Private expenditure. C) Government expenditure. D) Net export. Show Answer Correct Answer: A) Consumption expenditure. 10. Which of the following indicates AD in an open economy A) Private household consumption expenditure. B) Household investment expenditure. C) Govt. expenditure + private consumption expenditure. D) Household expend+ private investment expend +govt expend + net exports. Show Answer Correct Answer: D) Household expend+ private investment expend +govt expend + net exports. 11. 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. 12. If MPC is greater than MPS, the value of the multiplier will be A) Greater than 2. B) Less than 2. C) Equal to 2. D) Equal to 5. Show Answer Correct Answer: A) Greater than 2. 13. 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. 14. A change in any of the determinants of AD will A) Shift the AD curve. B) Increase the Price Elasticity of AD currve. C) Cause Prices to Increse. D) Cause a movement along the AD curve. Show Answer Correct Answer: A) Shift the AD curve. 15. MPS + MPC = A) 1. B) .5. C) 0. D) 2. Show Answer Correct Answer: A) 1. 16. A change in any of the following factors could cause the aggregate demand curve to shift except: A) Fiscal policy. B) Expectations. C) Monetary policy. D) Price level. Show Answer Correct Answer: D) Price level. 17. If MPC (Marginal Propensity to Consume) is high, how would an increase in income impact on the AD curve? A) No change. B) Shift left. C) Shift right. D) None of above. Show Answer Correct Answer: C) Shift right. 18. Aggregate demand consists of which components of aggregate expenditure? A) (C), (I), (G) and (X-M). B) (I), (G) and (X-M). C) (C), (I), (G) and (X). D) (C), (I), (G) and (M). Show Answer Correct Answer: A) (C), (I), (G) and (X-M). 19. All of the following can SHIFT aggregate supply, except A) Changes in the price level. B) An innovation in technology. C) Supply side shocks from trading partners. D) Investments in infrastructure. Show Answer Correct Answer: A) Changes in the price level. 20. Illustrate the effect of the following on LRAS diagrams.A loss arable land from deforestation A) Increase LRAS. B) Decrease LRAS. C) No changes to LRAS. D) None of above. Show Answer Correct Answer: B) Decrease LRAS. ← PreviousNext →Related QuizzesMacroeconomics QuizzesAggregate Demand Quiz 1Aggregate Demand Quiz 2Aggregate Demand Quiz 3Aggregate Demand Quiz 4Aggregate Demand Quiz 6Aggregate Demand Quiz 7Aggregate Demand Quiz 8Aggregate Demand Quiz 9Aggregate Demand Quiz 10 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books