CHAPTER 5: Aggregate Demand and Supply

Which of the following effects does NOT explain why the aggregate demand (AD) curve slopes downward?

• Wealth effect

• Interest rate effect

• Exchange rate effect

• Sticky wage effect

What is Aggregate Demand (AD) in an economy?

• The total amount of money spent by the government.

• The total amount of goods exported by the economy.

• The total number of workers required for production.

• The total value of goods and services that economic agents are willing and able to purchase at a given price level.

Which theory explains why the short-run aggregate supply (SRAS) curve slopes upward?

• The theory of perfect competition in the short run.

• The theory of perfect supply and demand in the long run.

• The theory of sticky prices, sticky wages, and misperceptions.

• The theory of decreasing production costs.

The wealth effect, interest rate effect, and exchange rate effect explain which of the following?

• A horizontal supply curve.

• A vertical long-run supply curve.

• An upward-sloping short-run supply curve.

• A downward-sloping demand curve.

Movement along the aggregate supply curve is caused by which of the following?

• Technological factors.

• Labor force factors.

• Input material costs.

• The overall price level in the economy.

The Russia-Ukraine war caused oil prices to rise significantly. This event resulted in which of the following?

• The short-run aggregate supply curve shifting to the left.

• The short-run aggregate supply curve shifting to the right.

• Movement along the aggregate demand curve.

• Movement along the aggregate supply curve.

Which of the following is NOT a determinant of the long-run aggregate supply (LRAS) curve?

• The skill level of the labor force.

• The technology possessed by the country.

• The amount of capital the country owns.

• The overall price level in the economy.

If a country's labor force becomes more skilled and specialized, leading to increased productivity, what happens?

• The aggregate supply curve shifts to the left.

• Movement along the aggregate supply curve.

• Movement along the aggregate demand curve.

• The aggregate supply curve shifts to the right.

Suppose the economy is in equilibrium at the end of 2022. In 2023, consumers feel pessimistic about the economy and cut their spending. How do the price level and equilibrium output change?

• Both the price level and equilibrium output decrease.

• The price level decreases, but output increases.

• The price level increases, but output decreases.

• Both the price level and equilibrium output increase.

At the beginning of 2020, the economy was in equilibrium. The COVID-19 pandemic disrupted production and reduced supply. How did this event affect the price level and equilibrium output?

• The price level remained unchanged, and equilibrium output increased.

• The price level increased, and equilibrium output remained unchanged.

• The price level decreased, and equilibrium output increased.

• The price level increased, and equilibrium output decreased.