Understanding Macroeconomic Concepts

What happens to the aggregate demand curve when there is an increase in government spending?

• It becomes vertical.

• It shifts to the right.

• It remains unchanged.

• It shifts to the left.

Why does unemployment decrease when real GDP increases?

• Because inflation reduces the cost of labor.

• Because the aggregate supply curve shifts to the right.

• Because the government hires more workers.

• Because more goods are being produced, requiring more labor.

In the long run, what causes the aggregate supply curve to shift to the left?

• An increase in resource prices and wages.

• A decrease in government spending.

• A decrease in real GDP.

• An increase in unemployment.

What effect does government deficit spending have on the loanable funds market?

• It decreases the real interest rate.

• It decreases the demand for loans.

• It increases the demand for loans.

• It increases the supply of loans.

How does an increase in the real interest rate affect business investment?

• It decreases business investment.

• It encourages more investment.

• It has no effect on investment.

• It increases the supply of capital.