35) Aggregate demand ________ and shifts the AD curve ________ when ________.
A) increases; rightward; government expenditure increases
B) increases; rightward; taxes increase
C) increases; rightward; future expected proit decreases
D) decreases; leftward; foreign income increases
E) increases; leftward; government expenditure increases
Skill: Level 3: Using models
Section: Checkpoint 13.2
Status: Old
AACSB: Analytical thinking
36) A tax increase
A) decreases aggregate demand and the AD curve shifts leftward.
B) increases aggregate demand and the AD curve shifts rightward.
C) decreases the quantity of real GDP demanded and there is a movement up along the AD
curve.
D) increases the quantity of real GDP demanded and there is a movement down along the
AD curve.
E) does not shift or lead to a movement along the aggregate demand curve.
Skill: Level 3: Using models
Section: Checkpoint 13.2
Status: Old
AACSB: Relective thinking
37) Which of the following shifts the aggregate demand curve rightward?
A) a decrease in expected future income
B) a decrease in the price level
C) a tax cut
D) a decrease in the quantity of money
E) a decrease in government expenditures on goods and services
Skill: Level 2: Using deinitions
Section: Checkpoint 13.2
Status: Old
AACSB: Relective thinking
41
38) A tax cut ________ aggregate demand and ________.
A) decreases; shifts the AD curve rightward
B) increases; shifts the AD curve leftward
C) increases; shifts the AD curve rightward
D) decreases; shifts the AD curve leftward
E) does not change; does not shift the AD curve
Skill: Level 3: Using models
Section: Checkpoint 13.2
Status: Old
AACSB: Relective thinking
39) Which of the following statements is correct?
A) An increase in people’s expected future income shifts the aggregate demand curve
leftward.
B) A tax increase shifts the aggregate demand curve leftward.
C) An increase in potential GDP shifts the aggregate demand curve rightward.
D) An increase in exports shifts the aggregate demand curve leftward.
E) The higher the price level, the larger is the quantity of real GDP demanded.
Skill: Level 2: Using deinitions
Section: Checkpoint 13.2
Status: Old
AACSB: Relective thinking
40) If taxes are cut, there is
A) an increase in aggregate demand and the AD curve shifts rightward.
B) a decrease in aggregate demand and the AD curve shifts leftward.
C) an increase in the quantity of real GDP demanded and a movement up along the AD
curve.
D) a decrease in the quantity of real GDP demanded and a movement down along the AD
curve.
E) no change in aggregate demand, only a change in potential GDP.
Skill: Level 2: Using deinitions
Section: Checkpoint 13.2
Status: Old
AACSB: Relective thinking
42
41) Which of the following decreases aggregate demand and shifts the AD curve leftward?
A) a tax cut
B) an interest rate hike
C) an increase in quantity of money
D) an increase in government expenditures on goods and services
E) a decrease in potential GDP
Skill: Level 2: Using deinitions
Section: Checkpoint 13.2
Status: Old
AACSB: Relective thinking
42) If a country is trying to recover from a recent recession, it is unlikely their government
oicials will decide to ________ because it would ________.
A) lower interest rates; decrease aggregate demand
B) raise interest rates; decrease aggregate demand
C) raise interest rates; increase aggregate demand
D) institute a tax cut; increase aggregate demand
E) increase taxes; increase aggregate demand
Skill: Level 3: Using models
Section: Checkpoint 13.2
Status: New
AACSB: Relective thinking
43) If the Fed increases the quantity of money, 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) both the aggregate demand curve and the aggregate supply curve shift leftward.
Skill: Level 3: Using models
Section: Checkpoint 13.2
Status: Old
AACSB: Relective thinking
43
44) An increase in the quantity of money ________ aggregate demand and ________.
A) increases; shifts the aggregate demand curve rightward
B) increases; shifts the aggregate demand curve leftward
C) decreases; shifts the aggregate demand curve rightward
D) decreases; shifts the aggregate demand curve leftward
E) increases; rotates the aggregate demand curve so it is steeper
Skill: Level 2: Using deinitions
Section: Checkpoint 13.2
Status: Old
AACSB: Relective thinking
45) Which of the following statements is correct?
A) An increase in the price level shifts the aggregate demand curve rightward.
B) An increase in the price level shifts the aggregate demand curve leftward.
C) An increase in the quantity of the money shifts the aggregate demand curve rightward.
D) An increase in the real interest rate shifts the aggregate demand curve rightward.
E) An increase in the money wage rate shifts the aggregate demand curve leftward.
Skill: Level 2: Using deinitions
Section: Checkpoint 13.2
Status: Old
AACSB: Relective thinking
46) Aggregate demand ________ and shifts the AD curve ________ when ________.
A) decreases; leftward; government expenditure increases
B) increases; rightward; taxes increase
C) decreases; leftward; foreign incomes decrease
D) decreases; rightward; government expenditure increases
E) increases; leftward; taxes decrease
Skill: Level 3: Using models
Section: Checkpoint 13.2
Status: Old
AACSB: Analytical thinking
44
47) Aggregate demand ________ and shifts the AD curve ________ when ________.
A) decreases; leftward; the price level rises
B) increases; leftward; taxes increase
C) increases; rightward; foreign incomes increase
D) decreases; rightward; government expenditure increases
E) increases; rightward; taxes increase
Skill: Level 3: Using models
Section: Checkpoint 13.2
Status: Old
AACSB: Analytical thinking
48) One of the inluences that the world economy has on U.S. aggregate demand comes
from changes in
A) world opinion.
B) foreign income.
C) foreign governments.
D) world pollution.
E) foreign aid.
Skill: Level 2: Using deinitions
Section: Checkpoint 13.2
Status: Old
AACSB: Relective thinking
49) If European economies enter a recession,
A) U.S. aggregate demand decreases and the U.S. AD curve shifts leftward.
B) U.S. aggregate demand increases and the U.S. AD curve shifts rightward.
C) the quantity of real GDP demanded in the United States decreases and there is a
movement down along the U.S. AD curve.
D) the quantity of real GDP demanded in the United States increases and there is a
movement up along the U.S. AD curve.
E) U.S. aggregate demand decreases and the U.S. AD curve shifts rightward.
Skill: Level 3: Using models
Section: Checkpoint 13.2
Status: Old
AACSB: Relective thinking
45
50) A decrease in foreign income ________ exports of U.S.-made goods, so aggregate
demand ________ and the aggregate demand curve shifts ________.
A) increases; increases; rightward
B) decreases; decreases; leftward
C) decreases; increases; rightward
D) increases; increases; leftward
E) decreases; decreases; rightward
Skill: Level 2: Using deinitions
Section: Checkpoint 13.2
Status: Old
AACSB: Analytical thinking
51) Suppose the exchange rate in the year 2010 was 4 yuan per dollar and in 2011 the
exchange rate fell to 3 yuan per dollar. If the price of a Chinese sweater was 120 yuan in
both years, the new dollar price in 2011 would be ________ and imports of Chinese sweaters
would ________.
A) $40; increase
B) $30; decrease
C) $40; decrease
D) $30; increase
E) $40; stay the same because the price stayed the same at 120 yuan
Skill: Level 3: Using models
Section: Checkpoint 13.2
Status: Old
AACSB: Analytical thinking
46
52) In the igure above, as the price level increases, the aggregate demand curve will
A) shift from AD1 to AD3.
B) shift from AD1 to AD2.
C) not shift, but the aggregate demand curve will change so that it is positively sloped.
D) not shift.
E) shift from AD1 to AD3 and then back to AD1.
Skill: Level 3: Using models
Section: Checkpoint 13.2
Status: Old
AACSB: Analytical thinking
53) In the igure above, the shift in the aggregate demand curve from AD1 to AD2 could be
result of
A) a fall in the price level.
B) a decrease in the quantity of money.
C) an increase in government expenditures on goods and services.
D) an increase in taxes.
E) a rise in the price level.
Skill: Level 3: Using models
Section: Checkpoint 13.2
Status: Old
AACSB: Analytical thinking
47
54) In the igure above, the shift in the aggregate demand curve from AD1 to AD3 could be
the result of
A) a decrease in the real interest rate.
B) a decrease in the buying power of money.
C) an increased expectation of a recession that lowers the expected rate of proit from
investment.
D) a decrease in the foreign exchange rate.
E) an increase in the price level.
Skill: Level 3: Using models
Section: Checkpoint 13.2
Status: Old
AACSB: Analytical thinking
55) In the igure above, the shift in the aggregate demand curve from AD1 to AD3 could be
the result of
A) a fall in the price level.
B) a tax cut.
C) an increased expectation of a recession that lowers people’s expected future incomes.
D) a decrease in the foreign exchange rate.
E) a rise in the price level.
Skill: Level 3: Using models
Section: Checkpoint 13.2
Status: Old
AACSB: Analytical thinking
56) In the igure above, the shift in the aggregate demand curve from AD1 to AD3 could be
the result of an increase in
A) expected future income.
B) the foreign exchange rate.
C) foreign incomes.
D) the price level.
E) aggregate supply.
Skill: Level 3: Using models
Section: Checkpoint 13.2
Status: Old
AACSB: Analytical thinking
48
57) A change in any component of aggregate demand creates a larger change in overall
aggregate demand. This is the ________ efect, and it means, for example, that a(n) ________
in consumption will cause an even larger ________ in AD.
A) multiplier; increase; increase
B) liquidity; decrease; decrease
C) growth; increase; decrease
D) multiplier; decrease; decrease
E) liquidity; increase; increase
Skill: Level 2: Using deinitions
Section: Checkpoint 13.2
Status: Old
AACSB: Analytical thinking
58) The aggregate demand multiplier efect says that an initial increase in expenditure
plans leads to an induced
A) increase in consumption expenditure.
B) increase in production expenditure.
C) increase in government expenditures on goods and services.
D) decrease in the price level.
E) increase in exports.
Skill: Level 3: Using models
Section: Checkpoint 13.2
Status: Old
AACSB: Relective thinking
59) Because of the existence of the aggregate demand multiplier, a $10 billion change in
expenditure
A) shifts the aggregate demand curve by more than $10 billion.
B) shifts the aggregate demand curve by $10 billion.
C) shifts the aggregate demand curve by less than $10 billion.
D) changes the slope of the aggregate demand curve so it is less steep.
E) changes the slope of the aggregate demand curve so it is steeper.
Skill: Level 2: Using deinitions
Section: Checkpoint 13.2
Status: Old
AACSB: Analytical thinking
49
60) If investment spending increases by $1 million, then the aggregate demand curve shifts
A) rightward by $1 million.
B) rightward by more than $1 million.
C) rightward by less than $1 million.
D) leftward by more than $1 million.
E) leftward by less than $1 million.
Skill: Level 2: Using deinitions
Section: Checkpoint 13.2
Status: Old
AACSB: Analytical thinking
61) When the price level rises there is a ________ the aggregate demand curve.
A) rightward shift of
B) movement down along
C) leftward shift of
D) movement up along
E) rotation of
Skill: Level 1: Deinition
Section: Checkpoint 13.2
Status: Old
AACSB: Relective thinking
62) A rise in the price level
A) raises the buying power of money.
B) decreases the prices of exports.
C) lowers the buying power of money.
D) increases aggregate demand.
E) makes the aggregate demand curve steeper.
Skill: Level 2: Using deinitions
Section: Checkpoint 13.2
Status: Old
AACSB: Relective thinking
50