Macroeconomics 2 (ECN201/ECO201/ECO2A1) Individual assignment Due date:29 April 2022 1. Which would likely cause the AS curve to shift to the left? a. decrease in government spending b. decrease in the price of oil c. increase in the price of oil d. increase in government spending 2. Which of the following statements is/are correct? I. A decrease in the price level causes a shift of the AD curve to the left. II. An increase in the price level causes a shift of the AD curve to the right. III. An increase in the nominal money supply shifts the AS curve to the right. a. b. c. d. e. Not I, II or III Only I. Only II Only III None of the options a to d 3. Which of the following statements is/are correct? I. The aggregate supply curve shows that an increase in income level leads to an increase in the price level. II. The aggregate supply curve shows that an increase in price level leads to an increase in the income level. III. According to the AD curve a decrease in the price level decreases the level of output and income. a. b. c. d. e. I, II and III Only I and II Only I and III Only II and III None of the options a to d 4. What happens when the aggregate demand curve shifts left? a. Income increases at all price levels b. Income decreases at all price levels c. Input increases at all price levels d. Input decreases at all price levels 5. Which of the following will not cause a country's AD curve to shift left? a. A reduction in government spending b. An increase in tax c. A decrease in money supply. d. An increase in the price level. 6. An increase in government spending shifts the AD curve to the left. a. True b. False 7. Refer to the Aggregate Demand curve in the above graph. The economy would move from point a to b along the AD curve if a. the money supply increased b. the price level fell c. taxes increased d. both a and b 8. The aggregate supply curve shows that an increase in the price level leads to an increase in income level. a. True b. False 9. If South Africa were to discover a plentiful supply of cheap oil, this would: a. move the AD curve to the left. b. move the AD curve to the right. c. move the AS curve to the left. d. move the AS curve to the right. e. have no effect on the curves. 10. Indicate which one of the following statements is false a. In the AD-AS model prices are regarded as variable. b. In the AD-AS model wages have no impact on the level of output. c. In the AD-AS model the impact of monetary policy on the level of output can be analysed. d. In the AD-AS model the level of economic activity (output) is determined by the interaction of aggregate demand and supply. 11. Which one of the following statements is incorrect?. In the AD-AS model: a. there is an inverse relationship between the general price level and the volume of goods and services demanded. b. there is a positive relationship between the general price level and the volume of goods and services supplied. c. the volume of goods and services demanded decreases as the general price level decreases. d. the volume of goods and services supplied increases as the general price level increases. e. the AD curve has essentially the same shape as any normal demand curve. 12. Which one of the following is not a component of aggregate demand in the economy? a. Consumption spending by households. b. Investment spending by firms. c. Spending on our exports by foreigners. d. The productivity of the factors of production. e. Government spending. 13. Which one of the following will give rise to an increase in aggregate demand, illustrated by a rightward shift of the AD curve? a. A deterioration in business confidence as a result of increased political violence. b. A decrease in the repo rate. c. An increase in the company tax rate. d. A decrease in the international prices of the commodities that we export (eg gold, platinum, coal). e. A sharp appreciation of the rand against the major currencies. 14. Complete the following sentence: In terms of the AD-AS model a decrease in the interest rate leads to a(n) _______________ in investment spending, a(n) _______________ in aggregate spending, a(n) ______________ in aggregate demand and, eventually to a(n) ________________ in total production and (or) a(n) _______________ in the price level. a. decrease; decrease; decrease; decrease; decrease b. c. d. e. increase; increase; increase; increase; increase increase; increase; decrease; decrease; decrease decrease; decrease; increase; increase; increase decrease; increase; increase; increase; decrease 15. In the AD-AS model an increase in productivity without any increase in remuneration will: a. leave the AS curve unchanged. b. shift the AD curve to the right. c. increase the general price level. d. increase the level of production and income. e. leave prices, production and income unchanged. 16. In the AD-AS model a simultaneous decrease in wages and decrease in consumption spending by households will lead to: a. a simultaneous increase in the price level and in the level of production and income. b. an increase in the price level and an indeterminate change in the level of production and income. c. a decrease in the price level and an indeterminate change in the level of production and income. d. an increase in the level of production and income and an indeterminate change in the price level. e. a decrease in the level of production and income and an indeterminate change in the price level. 17. In the AD-AS model a simultaneous increase in investment spending and increase in the productivity of labour will lead to: a. a simultaneous increase in the price level and in the level of production and income. b. an increase in the price level and an indeterminate change in the level of production and income. c. a decrease in the price level and an indeterminate change in the level of production and income. d. an increase in the level of production and income and an indeterminate change in the price level. e. a decrease in the level of production and income and an indeterminate change in the price level. 18. In the AD-AS model a simultaneous increase in government spending and increase in the price of oil will lead to: a. a simultaneous increase in the price level and in the level of production and income. b. an increase in the price level and an indeterminate change in the level of production and income. c. a decrease in the price level and an indeterminate change in the level of production and income. d. an increase in the level of production and income and an indeterminate change in the price level. e. a decrease in the level of production and income and an indeterminate change in the price level. 19. Which one of the following statements is incorrect? An expansionary monetary policy: a. b. c. d. e. can be illustrated by an upward movement of the AS curve. can be illustrated by an upward movement of the AD curve. will tend to increase the price level in the short run. will tend to increase the level of income and production the short run. will leave the AS curve unchanged in the short run. 20. Which one of the following will lead a decrease in aggregate supply, illustrated by a leftward shift of the AS curve? a. A decrease in the price of imported oil. b. A decrease in wages. c. A decrease in interest rates. d. A decrease in productivity. e. A decrease in consumption spending by households.
