Practice Quiz 4: Aggregate Demand and Aggregate Supply
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1.
The phase of the business cycle in which real domestic output declines is called:
A.
the peak.
B.
a recovery.
C.
a recession.
D.
the trough.
2.
The wealth or real balances effect indicates that:
an increase in the price level will increase the demand for money, increase interest rates, and reduce consumption and investment spending.
a lower price level will decrease the real value of many financial assets and therefore reduce spending.
a higher price level will increase the real value of many financial assets and therefore increase spending.
a higher price level will decrease the real value of many financial assets and therefore reduce spending.
3.
An increase in investment spending caused by a decline in the interest rate will:
shift the aggregate supply curve to the left.
move the economy up along an existing aggregate demand curve.
shift the aggregate demand curve to the left.
shift the aggregate demand curve to the right.
4.
R-1 F11025
Refer to the above diagram of an economy's aggregate supply curve. This economy would experience less than full-employment output in:
range 1 only.
range 1 and part of range 2.
part of range 2 and all of range 3.
range 3 only.
5.
A rightward shift in the aggregate supply curve might best be explained by:
an increase in business taxes.
a decrease in productivity.
an increase in nominal wages.
a decrease in the price of imported resources.
6.
R-2 F11084
Refer to the above diagram. The change in aggregate demand from AD*B 5 to AD*B 6:
would increase real output but not the price level because this change occurs in the horizontal range of the aggregate supply curve.
would increase the price level but not real output because this change occurs in the vertical range of the aggregate supply curve.
could not occur because real output is already at its absolute full-capacity level.
might have been caused by a decline in investment or government spending which is unrelated to the price level.
7.
In which of the following sets of circumstances can we confidently expect inflation?
aggregate supply and aggregate demand both increase
aggregate supply and aggregate demand both decrease
aggregate supply decreases and aggregate demand increases
aggregate supply increases and aggregate demand decreases
8.
R-3 F11088
Which of the above diagrams best portrays the effects of an increase in resource productivity?
A
B
C
D
9.
Which of the above diagrams best portrays the effects of an increase in consumer spending?
10.
Which of the above diagrams best portrays the effects of a dramatic increase in energy prices?