Macro Unit 3 (3.1-3.6) Practice MCQ's

Which of the following will result in a rightward shift of the aggregate demand curve?

• An increase in the income tax rate

• An increase in exports

• A decrease in the price level

• A decrease in household income

The diagram below shows various points on three aggregate demand (AD) curves.

A decrease in the price level will produce a movement between which of the following two points on the diagram above?

• From point X to point Y

• From point W to point Y

• From point Z to point Y

• From point Y to point Z

Which of the following is a reason why the aggregate demand curve is downward sloping?

• A higher price level decreases savings.

• A higher price level decreases interest rates.

• A higher price level increases exports.

• A higher price level decreases real wealth.

Which of the following will cause a rightward shift of the short-run aggregate supply curve?

• A decrease in the costs of production

• A decrease in the price level

• An increase in income taxes

• An increase in nominal wages

Which of the following will most likely cause the short-run aggregate supply curve to shift to the left?

• A decrease in nominal wages

• A decrease in the expected rate of inflation

• An increase in energy prices

• An increase in the size of the labor force

The diagram below shows two points on the short-run aggregate supply curve.

The movement from point g to point h is best described as which of the following?

• A decrease in full employment output

• A decrease in aggregate demand

• An increase in real output due to an increase in the price level

• An increase in real output due to technological change

Which of the following will remain unchanged when the price level decreases?

• Inflationary expectations

• Aggregate quantity demanded

• Nominal wages

• Long-run aggregate supply

Which of the following explains why the long-run aggregate supply curve corresponds to the production possibilities curve?

• Both curves are downward sloping.

• Both curves illustrate the maximum sustainable capacity.

• Both curves illustrate flexible wages and prices.

• Both curves illustrate the trade-off between inflation and unemployment.

Which of the following must be true in the long-run?

• Production increases when prices increase.

• An increase in the price level reduces aggregate demand.

• Full employment increases when price level decreases.

• Prices and wages are flexible.

Given the graph of the short-run aggregate supply (SRAS) and long-run aggregate supply (LRAS) curves, which of the following is true?

• At point Z, the economy has cyclical unemployment.

• At point Z, the economy is in long-run equilibrium but not in short-run equilibrium.

• At point Y, the natural rate of unemployment is zero.

• At point X, the economy is experiencing a recessionary gap.