Aggregate Demand and Supply Quiz

Aggregate Demand (AD) in an economy increases when:

• Interest rates increase.

• Consumer confidence increases.

• Taxes increase.

• Import prices increase.

The short-run aggregate supply curve slopes upwards because:

• Firms produce more when price levels increase.

• Input prices rise faster than product prices.

• Technology improves over time.

• Government spending increases.

Which of the following would cause a movement along the Aggregate Demand curve?

• A change in consumer confidence.

• A change in government policies.

• A change in the price level.

• A change in investment spending.

The long-run aggregate supply curve is vertical because:

• Price levels do not affect long-term output.

• The economy is always at full employment in the long run.

• Technology remains constant in the long run.

• Input prices are flexible in the long run.

Which of the following factors will shift the Aggregate Demand curve to the right?

• Decrease in consumer wealth.

• Increase in the exchange rate.

• Decrease in taxes.

• Increase in interest rates.

If the economy is at full employment, an increase in Aggregate Demand leads to:

• An increase in output.

• Lower price levels.

• Higher unemployment.

• Higher price levels.

Stagflation is a combination of:

• Inflation and economic growth.

• Deflation and high unemployment.

• Inflation and high unemployment.

• Economic growth and low inflation.

Cost-push inflation is primarily caused by:

• An increase in aggregate demand.

• A decrease in aggregate supply due to higher production costs.

• An increase in money supply.

• A decrease in taxes.

Which of the following is a component of Aggregate Demand?

• Consumer spending

• Business inventories

• Imports

• Savings

The concept of the multiplier effect states that:

• An initial change in spending will set off a spending chain that is magnified in the economy.

• Inflation will multiply if not controlled.

• The effect of a change in taxes is greater than a change in government spending.

• A small change in money supply will have a large effect on GDP.