National Income and Price Determination (Part 1)

Which of the following will cause a change in the aggregate demand curve to shift?

• Energy prices

• Productivity rates

• Consumer wealth

• Prices of inputs

• Prices of consumer goods

Which of the following best describes the aggregate demand curve?

• It is a curve that shows the relationship between consumer spending and income.

• It is a curve that shows the amount of goods and services domestic consumers will buy from domestic and foreign firms.

• It is a curve that shows the level of spending by consumers, businesses, the government, and the foreign sector at different price levels.

• It is a curve that shows only the level of government spending at different price levels.

• It is a curve that shows the level of spending by all factors of production at different price levels.

Which of the following explains the relationship between the price level and real output along the aggregate demand curve?

• At a lower price level, people need more money to spend and therefore deposit less money in banks, which lowers interest rates and increases real output.

• At a lower price level, the real value of savings decreases which causes an increase in spending.

• At a lower price level, domestic goods will become less expensive compared to foreign goods, which causes an increase in spending on domestic goods.

• At a lower price level, real incomes decrease which causes an increase in spending.

• At a lower price level, the purchasing power of consumers’ income decreases which causes an increase in spending.

How does a barter economy differ from a money economy?

• It encourages specialization and division of labor.

• It involves higher costs for each transaction.

• It eliminates the need for a double coincidence of wants.

• It has only a few assets that serve as a medium of exchange.

• It promotes market exchanges.

Aggregate demand may be measured by adding

• consumption, investment, savings, and imports

• savings, government spending, and business inventories

• consumption, investment, government spending, and net exports

• domestic private expenditures and government spending

• domestic expenditures and imports

Which of the following will most likely be caused by an increase in the capital stock?

• The aggregate demand curve to shift leftward.

• The production possibilities curve to shift in.

• The Phillips curve to shift out.

• The long-run aggregate supply curve to shift rightward.

• The consumption function to shift down.

The government of Euroland is considering increasing government spending to avoid a recession. What is the most likely effect on aggregate demand in Euroland?

• There will be a movement along the AD curve to a lower real output.

• There will be a movement along the AD curve to a higher price level.

• There will be no change in the AD curve.

• There will be a leftward shift in the AD curve.

• There will be a rightward shift in the AD curve.

What must the MPS plus the MPC equal?

• zero.

• one.

• total income.

• saving.

• disposable income.