Chapter Eight: Module Quiz -- Aggregate Demand and Aggregate Supply

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  1. Which of the following is not a component of Aggregate Demand?

      Net Exports
      Government Expenditures

  2. An example of a government expenditure is

      employing a public school teacher.
      a social security payment to an elderly person.
      an AFDC (Aid to Families with Dependent Children) payment.
      an unemployment insurance check.
      All of the above

  3. Which of the following items is an investment?

      purchase of a stock.
      purchase of a mutual fund.
      purchase of a U.S. government bond.
      purchase of a new farm tractor.
      All of the above.

  4. The international trade effect argues that an increase in the Price level reduces Aggregate Demand because

      consumers' wealth is eroded.
      the price level increase makes the dollar weaker which decreases net exports.
      the price level increase makes the dollar stronger which decreases net exports.
      None of the Above

  5. Which factor would shift the Aggregate Demand curve to the right?

      an increase in real incomes due to a rise in GDP.
      an increase in real wages.
      a fall in interest rates which increases investment.
      an appreciation of the dollar.

  6. Which of the following statements about the long-run Aggregate Supply curve is true?

      No matter how much prices increase, output remains the same.
      Output is at its potential level.
      The economy must be at its natural rate of unemployment.
      All input costs have time to fully adjust.
      All of the above.

  7. Stagflation results from

      a shift of the AD curve to the right.
      a shift of the AD curve to the left.
      a shift of the AS curve to the right.
      a shift of the AS curve to the left.

  8. Which of the following events will shift the Aggregate Supply curve to the left?

      real wages rise.
      inflation expectations decrease.
      land costs fall.
      a fall in interest rates.
      None of the Above

  9. The short-run Aggregate Supply curve is upward sloping only because we assume that resource costs are held constant.


  10. If Aggregate Demand exceeds Aggregate Supply, unwanted inventories will begin to accumulate, forcing firms to reduce prices to get rid of those inventories.


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