If a change in aggregate demand results in a recession, the price level and real output will change in which of the
following ways in the short run?
(A)Price Level = No change ; Real Output = Increase
(B)Price Level = Increase ; Real Output = No change
(C)Price Level = Increase ; Real Output = Decrease
(D)Price Level = Decrease ; Real Output = No change
(E)Price Level = Decrease ; Real Output = Decrease
The aggregate demand curve assumes that
(A)as the price of a good or service increases, nominal wages decrease
(B)as the domestic price level increases, consumers substitute domestic goods for foreign goods
(C)all prices and total consumer incomes are constant
(D)changes in the price level affect real wealth
(E)nominal interest rates increase as the price level decreases
Which of the following will cause an increase in aggregate demand?
(A)An increase in the price level
(B)A decrease in income taxes
(C)An increase in the demand for money
(D)A decrease in the supply of money
(E)A decrease in government transfer payments
As a component of aggregate demand, investment refers to the
(A)purchase of raw land for later resale
(B)purchase of stocks and bonds
(C)purchase of new equipment and additional inventories
(D)difference between people’s income and spending
(E)dividends paid out to shareholders
Which of the following will shift the aggregate demand curve to the right?
(A)A report that corporate earnings were lower than expected
(B)An increase in interest rates caused by a tightening of monetary policy
(C)Increased imports caused by appreciation of the dollar
(D)Increased spending by businesses on computers
(E)An increase in the government’s budget surplus
All of the following changes will shift the investment demand curve to the right EXCEPT
(A)a decrease in the corporate income tax rate
(B)an increase in the productivity of new capital goods
(C)an increase in the real interest rate
(D)an increase in corporate profits
(E)an increase in real gross domestic product
With an increase in the real interest rate, consumption and real gross domestic product will most likely change in which
of the following ways?
(A)Consumption = Increase ; RGDP = Increase
(B)Consumption = Increase ; RGDP = Decrease
(C)Consumption = Decrease ; RGDP = Increase
(D)Consumption = Decrease ; RGDP = Decrease
(E)Consumption = No change ; RGDP = Increase
An increase in which of the following would cause the aggregate demand curve to shift to the left?
(A)Consumer optimism
(B)Population
(C)Cost of resources
(D)Income taxes
(E)Net exports
One explanation for the downward slope of the aggregate demand curve is that when the price level increases, which of
the following will decrease?
(A)Real value of assets
(B)Prices of foreign goods
(C)Prices of substitute goods
(D)Expectations of future prices
(E)Government deficit
Aggregate demand may be measured by adding
(A)consumption, investment, savings, and imports
(B)savings, government spending, and business inventories
(C)consumption, investment, government spending, and net exports
(D)domestic private expenditures and government spending
(E)domestic expenditures and imports
Which of the following statements best describes the impact of a decrease in Japanese income on aggregate demand in
the United States?
(A)There will be no change in aggregate demand because United States aggregate demand depends only on the income
of United States consumers.
(B)Aggregate demand will decrease because the demand for United States exports decreases.
(C)Aggregate demand will decrease because the value of the United States dollar decreases relative to the Japanese yen.
(D)Aggregate demand will increase because a decrease in income in Japan causes an increase in income in the United
States.
(E)Aggregate demand will increase because interest rates in the United States decrease.
Which of the following changes would cause an economy’s aggregate demand curve to shift to the right?
(A)An increase in spending on imports
(B)An increase in autonomous consumption spending
(C)An increase in interest rates
(D)A decrease in the money supply
(E)A decrease in the overall price level in the economy
Under which of the following conditions would consumer spending most likely increase?
(A)Consumers have large unpaid balances on their credit cards.
(B)Consumers’ wealth is increased by changes in the stock market.
(C)The government encourages consumers to increase their savings.
(D)Social security taxes are increased.
(E)Consumers believe they will not receive pay increases next year.
An increase in which of the following will increase aggregate demand?
(A)Taxes
(B)Government spending
(C)The federal funds rate
(D)Reserve requirements
(E)The discount rate
The aggregate demand curve is downward sloping because as the price level increases the
(A)purchasing power of wealth decreases
(B)demand for imports decreases
(C)demand for interest-sensitive expenditures increases
(D)demand for domestically produced substitute goods increases
(E)real value of fixed assets increases
Which of the following changes will have the smallest expansionary effect on aggregate demand in the short run?
(A)An increase in exports of $100
(B)An increase in government spending of $100
(C)A decrease in taxes of $100
(D)A decrease in imports of $100
(E)A decrease in savings of $100