Aggregate Demand and Supply – Practice Quiz

Changes in aggregate demand are caused by these factors EXCEPT

Select one:
a. changes in the demand for consumption goods and services
b. changes in investment spending
c. changes in the price level
d. changes in the government's demand for goods and services

Wage is an example of a
Select one:
a. sticky price
b. flexible price
c. equilibrium price
d. auction price

Economic school that refers to the determination of output in the short run based strictly on changes in
demand
Select one:
a. Classical economics
b. Keynesian economics
c. New Keynesian economics
d. Neo-classical economics

Which of the following is NOT a reason why the aggregate demand curve slopes downward?
Select one:
a. The exchange-rate effect
b. The interest-rate effect
c. The wealth effect
d. The classical dichotomy/monetary neutrality effects

According to the wealth effect, aggregate demand slopes downward (negatively) because
Select one:
a. lower prices increase the value of money holdings and consumer spending increases.
b. lower prices decrease the value of money holdings and consumer spending decreases.
c. lower prices increase money holdings, decrease lending, interest rates rise, and investment spending falls.
d. lower prices reduce money holdings, increase lending, interest rates fall, and investment spending
increases.
According to the interest rate effect, aggregate demand slopes downward (negatively) because
Select one:
a. lower prices decrease the value of money holdings and consumer spending decreases.
b. lower prices increase money holdings, decrease lending, interest rates rise, and investment spending falls.
c. lower prices increase the value of money holdings and consumer spending increases.
d. lower prices reduce money holdings, increase lending, interest rates fall, and investment spending
increases.

As the domestic price level rises, foreign‐made goods become relatively cheaper so that the demand for
imports increases. This shows
Select one:
a. The interest-rate effect
b. The wealth effect
c. The exchange-rate effect
d. The classical dichotomy/monetary neutrality effects

Suppose consumers were to decrease their spending on all goods and services, perhaps as a result of a
recession, then the aggregate demand curve will
Select one:
a. shift to the left
b. no shift
c. increase
d. shift to the right

Why is the long-term aggregate supply curve vertical?

Select one:
a. In the long run, output never changes
b. In the short run, output never changes
c. In the short run, output is fixed by the factors of production
d. In the long run, output is fixed by the factors of production

Which of the following is not a possible result of a right shift of the aggregate supply curve?
Select one:
a. Lower output
b. Higher output
c. Lower price level
d. Left shift of the aggregate demand curve
 Which of the following is an example of an adverse supply shock?
Select one:
a. Increase in consumption
b. Increase in profits
c. Decrease in wage costs
d. Large increase in oil prices

When does the long-run aggregate supply curve shift?

Select one:
a. When foreign countries import more goods
b. When the capital stock increases
c. When consumers purchase more goods and services
d. When producers create more output

What is Y* in the equation for the short-run aggregate supply curve?

Select one:
a. The natural rate of output
b. The natural level of output
c. The natural level of unemployment
d. The natural rate of unemployment

What is the slope of the short-run aggregate supply curve?

Select one:
a. Downward
b. Upward
c. Vertical
d. Horizonta

What is the slope of the long-run aggregate supply curve?

Select one:
a. Downward
b. Upward
c. Vertical
d. Horizontal

What is the short run effect on output and the price level of a positive supply shock?
Select one:
a. They both fall
b. Output falls and the price level rises
c. Output rises and the price level falls
d. They both rise

What is the long-run effect on output and the price level of an adverse supply shock?
Select one:
a. They both rise
b. Output rises and the price level is unaffected
c. They both fall
d. Output is unaffected and the price level rises

What is the AS-AD model?

Select one:
a. A supply and demand model for the entire economy
b. A labor market representation
c. A model of savings and consumption
d. A model of the interest rate

What is one way that the long-run aggregate supply curve can shift?
Select one:
a. In the long run due to consumption
b. In the short run due to consumption
c. In the long run due to investment
d. In the short run due to investment

What does the aggregate supply curve show?

Select one:
a. The supply of services in an economy
b. The supply of goods in an economy
c. The total supply of goods and services in an economy
d. The total demand for goods and services in an economy

What do you call the intersection of the long-run aggregate supply curve and the aggregate demand
curve?
Select one:
a. Need more information
b. Unstable equilibrium
c. Long-run equilibrium
d. Short-run equilibrium

What are the factors of production?

Select one:
a. Labor and investment
b. Capital and investment
c. Investment and output
d. Capital and labor

According to the short run aggregate supply curve, what happens as the price level rises?
Select one:
a. Output decreases
b. Output is unchanged
c. Output increases
d. Output is infinitely changed