5) Which of the following produces a movement along the aggregate demand curve and
does not shift the aggregate demand curve?
A) a change in foreign incomes
B) a change in the price level
C) a change in monetary policy
D) a change in expectations about the future
E) a change in government expenditures on goods and services
Skill: Level 1: Deinition
Section: Checkpoint 13.2
Status: Old
AACSB: Relective thinking
6) A change in the price level produces a ________ the aggregate demand curve.
i. shift in
ii. change in the slope of
iii. movement along
A) i only
B) ii only
C) iii only
D) i and iii
E) i and ii
Skill: Level 1: Deinition
Section: Checkpoint 13.2
Status: Old
AACSB: Relective thinking
7) A fall in the price level produces a ________ the aggregate demand curve.
A) rightward shift of
B) movement downward along
C) leftward shift of
D) movement upward along
E) change in the slope of
Skill: Level 1: Deinition
Section: Checkpoint 13.2
Status: Old
AACSB: Relective thinking
31
8) An increase in the price level leads to
A) a rightward shift of the aggregate demand curve.
B) a leftward shift of the aggregate demand curve.
C) a movement upward along the aggregate demand curve.
D) a movement downward along the aggregate demand curve.
E) neither a shift in the aggregate demand curve nor a movement along it.
Skill: Level 1: Deinition
Section: Checkpoint 13.2
Status: Old
AACSB: Relective thinking
9) If the price level increases, there is ________ the AD curve and the quantity of real GDP
demanded ________.
A) a movement upward along; increases
B) a movement downward along; increases
C) a movement upward along; decreases
D) a leftward shift in; decreases
E) no change in; does not change
Skill: Level 1: Deinition
Section: Checkpoint 13.2
Status: Old
AACSB: Relective thinking
10) A rise in the price level ________ the buying power of money and ________ the quantity of
real GDP demanded.
A) does not afect; increases
B) lowers; increases
C) raises; decreases
D) lowers; decreases
E) does not afect; does not change
Skill: Level 2: Using deinitions
Section: Checkpoint 13.2
Status: Old
AACSB: Relective thinking
32
11) A rise in the price level brings a ________ in the buying power of money that ________
consumption expenditures and causes the quantity of real GDP demanded to ________.
A) rise; decreases; decrease
B) fall; decreases; decrease
C) fall; increases; increase
D) rise; increases; increase
E) fall; decreases; increase
Skill: Level 2: Using deinitions
Section: Checkpoint 13.2
Status: Old
AACSB: Relective thinking
12) When the price level increases there is ________ movement along the aggregate demand
curve because the buying power of money ________.
A) an upward; decreases
B) a downward; decreases
C) an upward; increases
D) a downward; increases
E) no; does not change
Skill: Level 2: Using deinitions
Section: Checkpoint 13.2
Status: Old
AACSB: Relective thinking
13) Last year the price level increased from 118 to 122. The increase in the price level
leads to a decrease in
A) the buying power of money.
B) the real interest rate.
C) the money wage rate.
D) the price of domestic goods and services relative to foreign goods and services.
E) potential GDP.
Skill: Level 2: Using deinitions
Section: Checkpoint 13.2
Status: Old
AACSB: Relective thinking
33
14) At a price level of 100, John has savings equal to $20,000. If the price level increases to
130, the buying power of John’s savings is approximately
A) $12,780.
B) $15,400.
C) $20,000.
D) $26,000.
E) $30,000.
Skill: Level 3: Using models
Section: Checkpoint 13.2
Status: Old
AACSB: Analytical thinking
15) A year over year ________ in the buying power of money means that deinitely ________
from one year to the next.
A) decrease; the price level increased
B) increase; the price level increased
C) decrease; inlation increased
D) increase; inlation increased
E) Both answers A and C are correct.
Skill: Level 3: Using models
Section: Checkpoint 13.2
Status: Old
AACSB: Analytical thinking
16) If the price level doubles, it will
A) increase the quantity of money.
B) have no efect on the buying power of money.
C) decrease the buying power of money.
D) increase potential GDP.
E) decrease potential GDP.
Skill: Level 2: Using deinitions
Section: Checkpoint 13.2
Status: Old
AACSB: Relective thinking
34
17) When the price level rises and increases the demand for money, the nominal interest
rate ________ and the real interest rate ________.
A) rises; rises
B) rises; falls
C) falls; rises
D) falls; falls
E) does not change; does not change
Skill: Level 2: Using deinitions
Section: Checkpoint 13.2
Status: Revised
AACSB: Relective thinking
18) In the short run, a rise in the price level brings a ________ in the real interest rate that
________ investment, bringing ________ in the quantity of real GDP demanded.
A) rise; decreases; a decrease
B) fall; decreases ; a decrease
C) fall; increases ; an increase
D) rise; increases ; an increase
E) rise; decreases; an increase
Skill: Level 2: Using deinitions
Section: Checkpoint 13.2
Status: Old
AACSB: Relective thinking
19) A reason why an increase in the price level decreases the quantity of real GDP
demanded is that
A) the buying power of money increases.
B) the real interest rate falls.
C) the price of domestic goods and services increases relative to foreign goods and
services.
D) the inlation rate decreases.
E) potential GDP decreases.
Skill: Level 1: Deinition
Section: Checkpoint 13.2
Status: Old
AACSB: Relective thinking
35
20) A rise in the U.S. price level brings a ________ in the price of U.S. exports relative to
imports that ________ exports of U.S. goods, bringing ________ in the quantity of U.S. real
GDP demanded.
A) rise; decreases; a decrease
B) fall; decreases; a decrease
C) fall; increases; an increase
D) rise; increases; an increase
E) rise; increases; a decrease
Skill: Level 1: Deinition
Section: Checkpoint 13.2
Status: Old
AACSB: Relective thinking
21) When the U.S. price level rises relative to other nations’ price levels, then
A) U.S. irms‘ proits increase and the aggregate demand curve shifts rightward.
B) U.S. exports increase and the aggregate demand curve shifts rightward.
C) U.S. exports decrease, U.S. imports increase, and the aggregate demand curve shifts
leftward.
D) U.S. exports decrease, U.S. imports increase, and there is a movement upward along the
aggregate demand curve.
E) U.S. exports decrease, U.S. imports increase, and the aggregate demand curve shifts
rightward.
Skill: Level 1: Deinition
Section: Checkpoint 13.2
Status: Old
AACSB: Relective thinking
22) Sherri lives in Canada and is considering buying a new sofa. If the price level in Canada
falls and the price level in the United States does not change, Canadian manufactured sofas
are relatively
A) more expensive, so Sherri will likely purchase a U.S. manufactured sofa.
B) more expensive, so Sherri will likely purchase a Canadian manufactured sofa.
C) less expensive, so Sherri will likely purchase a U.S. manufactured sofa.
D) less expensive, so Sherri will likely purchase a Canadian manufactured sofa.
E) Both answers B and D could be correct depending on whether U.S. manufactured sofas
were initially more expensive or less expensive than Canadian sofas.
Skill: Level 2: Using deinitions
Section: Checkpoint 13.2
Status: Old
AACSB: Relective thinking
36
23) When the domestic price level increases, exports decrease and imports increase. Other
things the same, this change is illustrated by a
A) movement upward along the aggregate demand curve.
B) movement downward along the aggregate demand curve.
C) rightward shift of the aggregate demand curve.
D) leftward shift of the aggregate demand curve.
E) rightward shift of the aggregate supply curve.
Skill: Level 2: Using deinitions
Section: Checkpoint 13.2
Status: Old
AACSB: Relective thinking
24) The aggregate demand curve shifts when any of the following factors change EXCEPT
A) foreign income.
B) the price level.
C) monetary policy.
D) expectations about the future.
E) iscal policy.
Skill: Level 1: Deinition
Section: Checkpoint 13.2
Status: Old
AACSB: Relective thinking
25) Which of the following does NOT shift the aggregate demand curve?
A) a change in the money wage
B) a change in expectations about the future
C) a change in monetary policy
D) a change in iscal policy
E) a change in foreign income
Skill: Level 1: Deinition
Section: Checkpoint 13.2
Status: Old
AACSB: Relective thinking
37
26) All of the following shift the aggregate demand curve to the right EXCEPT
A) an increase in taxes.
B) an expansion of the global economy.
C) an increase in foreign income.
D) an increase in government expenditure.
E) an increase in expected future proit.
Skill: Level 2: Using deinitions
Section: Checkpoint 13.2
Status: Old
AACSB: Relective thinking
27) All of the following actions shift the aggregate demand curve to the right EXCEPT
A) the Fed raises the interest rate.
B) an increase in government transfer payments.
C) inlation is expected to rise next year.
D) an increase in expected future proit.
E) a decrease in taxes.
Skill: Level 3: Using models
Section: Checkpoint 13.2
Status: Old
AACSB: Relective thinking
28) If there is an increase in expected future income, then
A) the aggregate demand curve shifts rightward.
B) the aggregate demand curve shifts leftward.
C) there is an upward movement along the aggregate demand curve.
D) there is a downward movement along the aggregate demand curve.
E) the aggregate demand curve becomes steeper.
Skill: Level 2: Using deinitions
Section: Checkpoint 13.2
Status: Old
AACSB: Relective thinking
38
29) Aggregate demand
A) decreases if expected future income rises.
B) increases if the exchange rate rises.
C) increases if government expenditures decrease.
D) increases if the expected inlation rate increases.
E) increases if aggregate supply increases.
Skill: Level 2: Using deinitions
Section: Checkpoint 13.2
Status: Old
AACSB: Relective thinking
30) Aggregate demand ________ if the expected inlation rate increases because ________.
A) increases; people expect to receive cost of living raises as the inlation begins
B) decreases; people wait for the exchange rates to change before making purchases
C) does not change; inlation does not afect the aggregate demand curve
D) increases; people want to make purchases now before the price of goods and services
begin to increase
E) decreases; people want to wait for the price of goods and services begin to decrease
Skill: Level 2: Using deinitions
Section: Checkpoint 13.2
Status: New
AACSB: Relective thinking
31) If people’s expectations about future income improve so they think their future income
will be higher than previously believed, then the AD curve
A) will not change until income actually rises.
B) will shift leftward because people will spend less now.
C) will shift rightward because people will increase spending now.
D) and the AS curve will both shift leftward because people will increase their saving.
E) will not shift, but potential GDP will increase.
Skill: Level 3: Using models
Section: Checkpoint 13.2
Status: Old
AACSB: Relective thinking
39
32) If irms’ expectations about the future become pessimistic so that they think future
proits will be lower, then
A) aggregate demand decreases and the AD curve shifts leftward.
B) aggregate demand increases and the AD curve shifts rightward.
C) the quantity of real GDP demanded decreases, and there is a movement up along the AD
curve.
D) the quantity of real GDP demanded increases, and there is a movement down along the
AD curve.
E) the aggregate demand curve does not shift, but potential GDP decreases.
Skill: Level 3: Using models
Section: Checkpoint 13.2
Status: Old
AACSB: Relective thinking
33) Which of the following decreases aggregate demand and shifts the AD curve leftward?
A) a tax cut
B) a decrease in price level
C) a decrease in government expenditures
D) a decrease in the price of exported goods and services
E) a decrease in potential GDP
Skill: Level 2: Using deinitions
Section: Checkpoint 13.2
Status: Old
AACSB: Relective thinking
34) An increase in government expenditure on goods and services leads to the
A) aggregate supply curve shifting rightward.
B) aggregate supply curve shifting leftward.
C) aggregate demand curve shifting rightward.
D) aggregate demand curve shifting leftward.
E) potential GDP increasing.
Skill: Level 3: Using models
Section: Checkpoint 13.2
Status: Old
AACSB: Relective thinking
40