ASAD model

Which of the following effects can account for the slope of the aggregate demand curve?

• The wealth effect

• The interest rate effect

• The net exports effect

• All of the above

Which of the following statements CANNOT explain the shape of an aggregate demand curve?

• When the price level increases, domestic products become less competitive than foreign products.

• When the price level increases, the purchasing power of people’s wealth falls.

• When the price level decreases, output prices are more flexible than input prices.

• When the price level decreases, real interest rates decrease and this encourages people to increase present consumption.

Which of the following items is NOT included in the aggregate output demanded?

• Real expenditure of a household on food

• Real value of an ancient statue (古代雕像) found underground

• Real value of a machine bought by a company

• Real wages paid to firemen by the government

Which of the following statements is INCORRECT?

• The GDP deflator can be used to measure the price level.

• Aggregate output is measured by its total market value at current prices.

• Aggregate output demanded is negatively related to the price level.

• Aggregate output demanded is equal to the sum of real private consumption expenditure, real gross investment expenditure, real government consumption expenditure and the real value of net exports.

Which of the following about an upward sloping aggregate supply curve is correct?

• It exists in both the short run and the long run.

• It only exists under imperfect information.

• It exists when input prices cannot be adjusted immediately with the price level due to the contracts signed.

• None of the above

In the long run, full employment real national income

• may not be achieved as people may not have perfect information.

• may not be achieved if there is government intervention.

• is always achieved as all factor markets attain full employment.

• is achieved when all output prices are flexible.

A point moves along the aggregate demand curve. This can be caused by

• a change in the international price level due to inflation in a foreign country.

• a change in real interest rates due to a change in investment demand.

• a change in the real value of wealth due to a change in the price level.

• a change in consumption due to a change in price expectations.

If the Hong Kong Dollar ________ against the Euro, the quantity of Hong Kong’s exports to Europe ________ while the quantity of Hong Kong’s imports from Europe ________. As a result, Hong Kong’s aggregate demand increases.

• depreciates; decreases; increases

• depreciates; increases; decreases

• appreciates; decreases; increases

• appreciates; increases; decreases

At the same price level, if the aggregate output supplied decreases in the short run,

(1) there is a temporary decrease in the potential GDP.

(2) there is a decrease in the short run aggregate supply.

(3) there is a change in non-price determinants of the aggregate supply.

• (1) and (2) only

• (1) and (3) only

• (2) and (3) only

• All of the above

Which of the following may shift the AD curve to the right? (can choose more than 1)

• A reduction in the general price level

• An increase in salaries tax allowance

• An increase in the minimum wage rate

• An increase in market interest rate