Aggregate S/D Quiz
A – Increase in AD
B – Decrease in AD C – Increase in AS
D – Decrease in AS
E – No Shift
1. The effect on businesses when Hurricane Katrina destroyed oil refineries causing an increase in gas
prices.
2. The government increases spending on the war in Iraq.
3. Consumer confidence falls as many consumers fear a recession.
4. The result on consumer spending when the government increases taxes for Universal Health Care
5. Mexico, a major importer of U.S. goods, has a depression.
6. Advances in education makes the workforce more productive
7. Price levels increase but interest rates stay the same
8. Prices of imported lumber from Canada fall significantly.
9. If the MPC of a country is .9 and there was an initial increase in consumer spending of $4 Million, how
much will total AD increase?
a. $36 million
b. $4 million
c. $40 million
d. $20 million
e. No Shift
10. If MPS is .3 and there is a $10 Million tax cut, how much will total AD increase?
a. $23 million
b. -$23 million
c. $4 million
d. -$4 million
11. Assume that the economy is in a recession and the gap is $100 billion dollars. If the MPC is .75, how
much spending should the government stimulate to real full employment?
a. $20 billion
b. $100 billion
c. $84 billion
d. $13.5 billion
e. $62 billion
12. A rightward shift in the aggregate supply curve is best explained by an increase in:
a. Business taxes
b. Productivity
c. Nominal Wages
d. The price of imported resources
e. Consumer spending