#1
Which of the following factors would cause an increase in aggregate demand?
An increase in government spending
ExplanationGovernment spending is a component of aggregate demand; an increase in it directly raises aggregate demand.
#2
What happens to the short-run aggregate supply curve in response to an increase in the price level?
Shifts rightward
ExplanationHigher prices incentivize producers to supply more, shifting the short-run aggregate supply curve to the right.
#3
What effect does an increase in government spending have on aggregate demand?
Shifts it rightward
ExplanationIncreased government spending directly adds to aggregate demand, shifting it to the right.
#4
What effect does a decrease in consumer spending have on aggregate demand?
Shifts it leftward
ExplanationLess consumer spending means less overall demand, leading to a leftward shift in the aggregate demand curve.
#5
What impact does an increase in household savings have on aggregate demand?
Shifts it leftward
ExplanationIncreased savings mean less consumption and less overall demand, leading to a leftward shift in the aggregate demand curve.
#6
In the context of aggregate supply, what effect would an increase in labor productivity have on the short-run aggregate supply curve?
Shift it rightward
ExplanationHigher labor productivity means more output can be produced with the same inputs, shifting the supply curve to the right.
#7
What is the primary reason for an inward shift of the aggregate demand curve?
A decrease in consumer confidence
ExplanationConsumer confidence influences spending behavior; a decrease leads to less spending and a leftward shift in the aggregate demand curve.
#8
Which of the following factors would cause a leftward shift in the long-run aggregate supply curve?
Decrease in capital stock
ExplanationLess capital stock reduces potential output in the long run, shifting the aggregate supply curve to the left.
#9
What effect would an increase in the price of imported raw materials have on the short-run aggregate supply curve?
Shift it leftward
ExplanationHigher input costs reduce profitability, leading to a decrease in supply and a leftward shift in the short-run aggregate supply curve.
#10
Which of the following would cause an inward shift in the long-run aggregate supply curve?
Decrease in the money supply
ExplanationA decrease in the money supply restricts investment and economic activity, leading to a leftward shift in the long-run aggregate supply curve.
#11
What happens to aggregate supply in the long run when there is an increase in the quality of education and training?
Shifts rightward
ExplanationBetter education and training improve productivity, leading to an increase in potential output and a rightward shift in the long-run aggregate supply curve.
#12
Which of the following scenarios would lead to a rightward shift of the long-run aggregate supply curve?
An increase in labor force participation
ExplanationMore labor force participation means more potential output in the long run, shifting the aggregate supply curve to the right.
#13
How would a decrease in the value of the domestic currency affect aggregate demand?
Shift it rightward
ExplanationA weaker domestic currency makes exports cheaper, leading to an increase in exports and a rightward shift in aggregate demand.
#14
Which of the following would lead to a decrease in aggregate demand?
Decrease in exports
ExplanationA decrease in exports means less demand for domestically produced goods, leading to a decrease in aggregate demand.
#15
What is the likely effect on aggregate supply if there is an increase in the cost of production?
Shifts leftward
ExplanationHigher production costs reduce profitability, leading to a decrease in supply and a leftward shift in the aggregate supply curve.
#16
Which of the following scenarios would lead to a leftward shift in the aggregate demand curve?
Increase in taxes
ExplanationHigher taxes reduce disposable income, leading to less spending and a leftward shift in the aggregate demand curve.
#17
How does an increase in the price of energy resources affect the short-run aggregate supply curve?
Shifts it leftward
ExplanationHigher energy prices increase production costs, reducing profitability and leading to a decrease in supply, shifting the curve to the left.