Aggregate Demand and Supply Review
1. What does aggregate demand represent?
(A) The total demand for goods and services in an economy
(B) The partial demand for goods and services in an economy
(C) The total demand for goods in an economy
(D) The partial demand for goods in an economy
2.What information is needed in order to maximize the usefulness of the aggregate demand curve?
(A) The interest rate
(B) The aggregate supply curve
(C) The price level
(D) The output level
3.What is the AS-AD model?
(A) A model of the interest rate
(B) A labor market representation
(C) A supply and demand model for the entire economy
(D) A model of savings and consumption
4.What does the aggregate supply curve show?
(A) The total demand for goods and services in an economy
(B) The supply of goods in an economy
(C) The supply of services in an economy
(D) The total supply of goods and services in an economy
5.What is the slope of the aggregate demand curve?
(A) Downward
(B) Upward
(C) Vertical
(D) Horizontal
6.What is the slope of the short-run aggregate supply curve?
(A) Downward
(B) Upward
(C) Vertical
(D) Horizontal
7. What is the slope of the long-run aggregate supply curve?
(A) Downward
(B) Upward
(C) Vertical
(D) Horizontal
8.Why is the long-term aggregate supply curve vertical?
(A) In the short run, output never changes
(B) In the short run, output is fixed by the factors of production
(C) In the long run, output never changes
(D) In the long run, output is fixed by the factors of production
9.What are the factors of production?
(A) Capital and labor
(B) Capital and investment
(C) Labor and investment
(D) Investment and output
10.What is one way that the long-run aggregate supply curve can shift?
(A) In the short run due to investment
(B) In the short run due to consumption
(C) In the long run due to investment
(D) In the long run due to consumption
11.Which curve usually shifts in the AS-AD model?
(A) Neither
(B) Both
(C) Aggregate demand
(D) Aggregate supply
12.Which of the following curves does not appear in the AS-AD model?
(A) Short-run aggregate supply
(B) Long-run aggregate supply
(C) Aggregate demand
(D) Long-run aggregate demand
13.Which of the following cannot shift the aggregate demand curve?
(A) Treasury
(B) Fed
(C) Government
(D) Consumers
14.Which way does expansionary policy shift the aggregate demand curve?
(A) Right
(B) Left
(C) No change
(D) Need more information
15.Which way does contractionary policy shift the aggregate demand curve?
(A) Right
(B) Left
(C) No change
(D) Need more information
16.What is aggregate supply fixed by in the long run?
(A) Aggregate demand
(B) Output
(C) Interest rates
(D) Factors of production
17.What do you call the intersection of the long-run aggregate supply curve and the aggregate demand curve?
(A) Long-run equilibrium
(B) Short-run equilibrium
(C) Unstable equilibrium
(D) Need more information
18.What do you call the intersection of the short-run aggregate supply curve and the aggregate demand curve?
(A) Long-run equilibrium
(B) Short-run equilibrium
(C) Unstable equilibrium
(D) Need more information
19.What is the short-run effect on output and the price level of the Fed pursuing expansionary monetary policy?
(A) Output falls and the price level rises
(B) Output rises and the price level falls
(C) They both rise
(D) They both fall
20.What is the long-run effect on output and the price level of the Fed pursuing expansionary monetary policy?
(A) Output falls and the price level rises
(B) Output rises and the price level falls
(C) They both rise
(D) Output is unchanged and the price level rises
21.What is the short-run effect on output and the price level of the Fed pursuing contractionary monetary policy?
(A) They both fall
(B) They both rise
(C) Output falls and the price level rises
(D) Output rises and the price level falls
22.What is the long-run effect on output and the price level of the Fed pursuing contractionary monetary policy?
(A) Output falls and the price level is unaffected
(B) Output is unaffected and the price level falls
(C) They both rise
(D) They both fall
23.What is the short run effect on output and the price level of an adverse supply shock?
(A) They both fall
(B) They both rise
(C) Output falls and the price level rises
(D) Output rises and the price level falls
24.What is the long-run effect on output and the price level of an adverse supply shock?
(A) They both fall
(B) They both rise
(C) Output rises and the price level is unaffected
(D) Output is unaffected and the price level rises
25.What is a possible result of an adverse supply shock?
(A) Healthy economy
(B) Low prices
(C) Stagflation
(D) High employment
26.When the short-run aggregate supply curve shifts, what shifts in response?
(A) Both the long-run and the short run aggregate supply curves
(B) Long-run aggregate supply curve
(C) Short-run aggregate supply curve
(D) Aggregate demand curve
27.When the aggregate demand curve shifts, what shifts in response?
(A) Short-run aggregate supply curve
(B) Long-run aggregate supply curve
(C) Aggregate demand curve
(D) Both the long-run and the short-run aggregate supply curves
28.When does the long-run aggregate supply curve shift?
(A) When consumers purchase more goods and services
(B) When the capital stock increases
(C) When producers create more output
(D) When foreign countries import more goods
29.Which of the following is an example of an adverse supply shock?
(A) Increase in consumption
(B) Increase in profits
(C) Large increase in oil prices
(D) Decrease in wage costs
30.Which of the following is best for the economy?
(A) Right shift of the aggregate supply curve
(B) Left shift of the aggregate supply curve
(C) Right shift of the aggregate demand curve
(D) Left shift of the aggregate demand curve
31.Which of the following is not a possible result of a right shift of the aggregate supply curve?
(A) Left shift of the aggregate demand curve
(B) Lower output
(C) Higher output
(D) Lower price level
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