Mod 3.1: Aggregate Demand

When the aggregate price level rises, other things equal, this will:

• lead to a rightward shift in the AD curve.

• lead to a leftward shift in the AD curve.

• result in an increase in the quantity of aggregate output demanded.

• result in a decrease in the quantity of aggregate output demanded.

• result in a decrease in the quantity of aggregate output supplied.

A change in real GDP that results when the domestic price level changes relative to a foreign price level is the ____ effect of a change in the price level.

• interest rate

• exchange rate

• real wealth

• price

• income

A change in consumer spending that results from a change in consumer’s purchasing power is known as the ____ effect of a change in the aggregate price level.

• interest rate

• exchange rate

• real wealth

• price

• income

The interest rate effect is the tendency for changes in the price level to affect:

• the quantity of investment demanded and thus interest rates.

• export demand and thus aggregate demand.

• interest rates and thus the quantity of investment and consumption.

• real incomes and lead to shifts in potential output.

• interest rates and thus the productivity of existing capital equipment.

Which of the following will result in a shift of the aggregate demand curve? (select all that apply)

• changes in wealth

• related goods

• existing physical capital

• government policies

• availability of land

Which of the following will shift the aggregate demand curve to the right?

• an increase in wealth

• pessimistic consumer expectations

• a decrease in the quantity of money

• an increase in the existing stock of capital

• a decrease in government spending

Which of the following will shift the aggregate demand curve to the left?

• lower unemployment

• a decrease in the existing stock of capital

• a decrease in taxes

• a decrease in government spending

• optimistic consumer expectations