Aggregate Demand and Aggregate Supply
137 questions· page 1 of 14
The diagram shows aggregate demand (AD) and long-run aggregate supply (LRAS) with X as the initial equilibrium.
Which combination of policy and new final equilibrium point is correct?
Options
| policy | new final equilibrium point | |
|---|---|---|
| A | increased direct taxation | F |
| B | increased government spending on infrastructure | G |
| C | appreciation of the exchange rates | H |
| ** | D** | decreased interest rates |
Which statement is not correct?
Options
A The long-run aggregate supply curve can be downward sloping.
B The long-run aggregate supply curve can be horizontal.
C The long-run aggregate supply curve can be upward sloping.
D The long-run aggregate supply curve can be vertical.
The aggregate demand curve is typically downward sloping.
What is one possible explanation for this?
Options
A A fall in the price level will lead to a rise in demand for imports.
B As the price level falls, improved productivity will reduce unit costs.
C If the price level is high, any interest rate changes will encourage consumption.
D The real value of assets increases as the price level falls.
The diagram shows aggregate demand (AD) and aggregate supply (AS) curves. The initial equilibrium is at X. A government decides to invest in an increase in infrastructure.
What will be the short-term effect of this policy on the equilibrium?
Options
A point A on Fig. 25.1
B point B on Fig. 25.1
C point C on Fig. 25.1
D point D on Fig. 25.1
The diagram shows aggregate demand (AD) and aggregate supply (AS) where the initial equilibrium is at point X.
The central bank forecasts a rise in raw material costs. The government plans to increase spending on health.
What would be the new equilibrium in the short run if the forecasts prove to be accurate and the government plans are implemented?
Options
A point A on Fig. 18.1
B point B on Fig. 18.1
C point C on Fig. 18.1
D point D on Fig. 18.1
A government has a target to reduce the rate of inflation.
Why might it not want to raise interest rates to achieve this target?
Options
A aggregate demand may fall
B aggregate supply may fall
C saving may fall
D the exchange rate may fall
The diagram shows an economy’s aggregate demand curve.
What explains the downward movement from L to M along the AD curve?
Options
A an increase in tariffs leading to decreased imports
B a decrease in taxes on firms, causing an increase in short-run aggregate supply
C an increase in consumer confidence, prompting higher spending on local goods as well as imports
D a slow-down in economic activity, resulting in decreased investment spending
Long-run aggregate supply (AS) in an economy can be represented diagrammatically in different ways.
For which AS curve would a long-term fall in aggregate demand always be likely to result in the level of employment remaining unchanged?
Options
The aggregate demand (AD) curve in an economy shifts to the left.
What is most likely to cause this shift?
Options
A a decrease in the exchange rate
B a decrease in the interest rate
C an increase in the budget deficit
D an increase in the current account deficit
The diagram shows the AD and AS curves for a low income country. Oil and gas make up 90% of its exports. The initial equilibrium level of national income is Y1.
What is the most likely new equilibrium point if the worldwide prices of oil and gas rise dramatically?
Options
A point A on Fig. 21.1
B point B on Fig. 21.1
C point C on Fig. 21.1
D point D on Fig. 21.1