Aggregate Demand and Aggregate Supply 8035
91. Suppose a fall in stock prices makes people feel poorer. The decrease in wealth would induce
people to
a. decrease consumption, shown as a movement to the left along a given aggregate-demand
curve.
b. increase consumption, shown as a movement to the right along a given aggregate–demand
curve.
c. decrease consumption, shown by shifting the aggregate-demand curve to the left.
d. increase consumption, shown by shifting the aggregate-demand curve to the right.
92. Suppose a stock market crash makes people feel poorer. This decrease in wealth would induce
people to
a. decrease consumption, which shifts aggregate supply left.
b. decrease consumption, which shifts aggregate demand left.
c. increase consumption, which shifts aggregate supply right.
d. increase consumption, which shifts aggregate demand right.
8036 Aggregate Demand and Aggregate Supply
93. From 2001 to 2005 there was a dramatic rise in the price of houses. If this rise made people feel
wealthier, then it would have shifted
a. aggregate demand right.
b. aggregate demand left.
c. aggregate supply right.
d. aggregate supply left.
94. From 2006 to 2008 there was a dramatic fall in the price of houses. If this fall made people feel
less wealthy, then it would have shifted
a. aggregate demand right.
b. aggregate demand left.
c. aggregate supply right.
d. aggregate supply left.
Aggregate Demand and Aggregate Supply 8037
95. From 1995 to 1999 there was a dramatic rise in stock prices. If this rise made people feel
wealthier, then it would have shifted
a. aggregate demand right.
b. aggregate demand left.
c. aggregate supply right.
d. aggregate supply left.
96. An increase in household saving causes consumption to
a. rise and aggregate demand to increase.
b. rise and aggregate demand to decrease.
c. fall and aggregate demand to increase.
d. fall and aggregate demand to decrease.
8038 Aggregate Demand and Aggregate Supply
97. When taxes decrease, consumption
a. decreases as shown by a movement to the left along a given aggregate-demand curve.
b. decreases as shown by a shift of the aggregate demand curve to the left.
c. increases as shown by a movement to the right along a given aggregate-demand curve.
d. increases as shown by a shift of the aggregate demand curve to the right.
98. When taxes increase, consumption
a. decreases as shown by a movement to the left along a given aggregate-demand curve.
b. decreases as shown by a shift of the aggregate demand curve to the left.
c. increases as shown by a movement to the right along a given aggregate-demand curve.
d. increases as shown by a shift of the aggregate demand curve to the right.
Aggregate Demand and Aggregate Supply 8039
99. When taxes decrease, consumption
a. increases, so aggregate demand shifts right.
b. increases, so aggregate supply shifts right.
c. decreases, so aggregate demand shifts left.
d. decreases, so aggregate supply shifts left.
100. When taxes increase, consumption
a. increases, so aggregate demand shifts right.
b. increases, so aggregate supply shifts right.
c. decreases, so aggregate demand shifts left.
d. decreases, so aggregate supply shifts left.
8040 Aggregate Demand and Aggregate Supply
101. Which of the following both shift aggregate demand left?
a. a decrease in taxes and at a given price level consumers feel more wealthy
b. a decrease in taxes and at a given price level consumers feel less wealthy
c. an increase in taxes and at a given price level consumers feel more wealthy
d. an increase in taxes and at a given price level consumers feel less wealthy
102. Other things the same, an increase in the amount of capital firms wish to purchase would initially
shift
a. aggregate demand right.
b. aggregate demand left.
c. aggregate supply right.
d. aggregate supply left.
Aggregate Demand and Aggregate Supply 8041
103. If businesses in general decide that they have overbuilt and so now have too much capital, their
response to this would initially shift
a. aggregate demand right.
b. aggregate demand left.
c. aggregate supply right.
d. aggregate supply left.
104. Suppose businesses in general believe that the economy is likely to head into recession and so
they reduce capital purchases. Their reaction would initially shift
a. aggregate demand right.
b. aggregate demand left.
c. aggregate supply right.
d. aggregate supply left.
8042 Aggregate Demand and Aggregate Supply
105. The initial impact of an increase in an investment tax credit is to shift
a. aggregate demand right.
b. aggregate demand left.
c. aggregate supply right.
d. aggregate supply left.
106. The initial impact of the repeal of an investment tax credit is to shift
a. aggregate demand right.
b. aggregate demand left.
c. aggregate supply right.
d. aggregate supply left.
Aggregate Demand and Aggregate Supply 8043
107. Other things the same, when the government spends more, the initial effect is that
a. aggregate demand shifts right.
b. aggregate demand shifts left.
c. aggregate supply shifts right.
d. aggregate supply shifts left.
108. Tax cuts shift aggregate demand
a. right as do increases in government spending.
b. right while increases in government spending shift aggregate demand left.
c. left as do increases in government spending.
d. left while increases in government spending shift aggregate demand right.
8044 Aggregate Demand and Aggregate Supply
109. When the money supply increases
a. interest rates fall and so aggregate demand shifts right.
b. interest rates fall and so aggregate demand shifts left.
c. interest rates rise and so aggregate demand shifts right.
d. interest rates rise and so aggregate demand shifts left.
110. When the Fed buys bonds
a. the supply of money increases and so aggregate demand shifts right.
b. the supply of money decreases and so aggregate demand shifts left.
c. the supply of money decreases and so aggregate demand shifts right.
d. the supply of money increases and so aggregate demand shifts left.
Aggregate Demand and Aggregate Supply 8045
111. When the money supply decreases
a. interest rates fall and so aggregate demand shifts right.
b. interest rates fall and so aggregate demand shifts left.
c. interest rates rise and so aggregate demand shifts right.
d. interest rates rise and so aggregate demand shifts left.
112. An increase in the money supply
a. and an investment tax credit both cause aggregate demand to shift right.
b. and an investment tax credit both cause aggregate demand to shift left.
c. causes aggregate demand to shift right, while an investment tax credit causes aggregate
demand to shift left.
d. causes aggregate demand to shift left, while an investment tax credit causes aggregate
demand to shift right.
8046 Aggregate Demand and Aggregate Supply
113. Which of the following would cause investment spending to decrease and aggregate demand to
shift left?
a. a decrease in the money supply and an investment tax credit.
b. the repeal of an investment tax credit and an increase in the money supply.
c. a decrease in the money supply and the repeal of an investment tax credit.
d. an investment tax credit and an increase in the money supply.
114. The Central Bank of Wiknam increases the money supply at the same time the Parliament of
Wiknam passes a new investment tax credit. Which of these policies shift aggregate demand to
the right?
a. both the money supply increase and the investment tax credit
b. the money supply increase but not the investment tax credit
c. the investment tax credit but not the money supply increase
d. neither the investment tax credit nor the money supply increase
Aggregate Demand and Aggregate Supply 8047
115. Which of the following shifts aggregate demand to the right?
a. the Federal Reserve buys bonds.
b. a decrease in net exports due to something other than a change in domestic prices.
c. an increase in household saving.
d. All of the above are correct.
116. Which of the following shifts aggregate demand to the right?
a. a decrease in the money supply
b. increases in the profitability of capital due perhaps to technological progress.
c. the repeal of an investment tax credit
d. a decrease in the price level
8048 Aggregate Demand and Aggregate Supply
117. Which of the following shifts aggregate demand to the left?
a. an increase in the price level.
b. households decide to save a larger fraction of their income.
c. an increase in net exports.
d. Congress passes a new investment tax credit.
118. Which of the following shifts aggregate demand to the right?
a. Congress reduces purchases of new weapons systems.
b. The Fed buys bonds in the open market.
c. The price level falls.
d. Net exports fall.
Aggregate Demand and Aggregate Supply 8049
119. Which of the following shifts aggregate demand to the left?
a. The price level rises.
b. Interest rates fall.
c. The dollar depreciates for some reason other than a change in the price level.
d. Stock prices fall for some reason other than a change in the price level.
120. Aggregate demand shifts right when the government
a. decreases taxes.
b. cuts military expenditures.
c. repeals an investment tax credit.
d. None of the above is correct.
8050 Aggregate Demand and Aggregate Supply
121. In 2009 Congress passed legislation providing states with funds to build roads and bridges. It also
instituted tax cuts. Which of these shifts aggregate demand right?
a. only the increased funding for states
b. only the tax cuts
c. both the increased funding for states and the tax cuts
d. neither the increased funding for states nor the tax cuts
122. Which of the following shifts aggregate demand to the right?
a. both an investment tax credit and a decrease in income tax rates
b. an investment tax credit but not a decrease in income tax rates
c. a decrease in income tax rates but not an investment tax credit
d. neither an investment tax credit nor a decrease in income tax rates
Aggregate Demand and Aggregate Supply 8051
123. Aggregate demand shifts right when the Federal Reserve
a. raises personal income taxes.
b. increases the money supply.
c. institutes an investment tax credit.
d. All of the above are correct.
124. Which of the following would both shift aggregate demand right?
a. the price level decreases and government expenditures increase.
b. the price level decreases and the government repeals an investment tax credit.
c. taxes decrease and government expenditures increase.
d. None of the above are correct.
8052 Aggregate Demand and Aggregate Supply
125. Which of the following both shift aggregate demand right?
a. net exports rise for some reason other than a price change and government purchases rise.
b. net exports rise for some reason other than a price change and taxes increase.
c. net exports fall for some reason other than a price change and government purchases fall.
d. net exports fall for some reason other than a price change and taxes fall.
126. Aggregate demand shifts right if
a. government purchases increase and shifts left if stock prices rise.
b. government purchases increase and shifts left if stock prices fall.
c. government purchases decrease and shifts left if stock prices rise.
d. government purchases decrease and shifts left is stock prices fall.
Aggregate Demand and Aggregate Supply 8053
127. Aggregate demand shifts left if
a. government purchases increase and shifts left if stock prices rise.
b. government purchases increase and shifts left if stock prices fall.
c. government purchases decrease and shifts left if stock prices rise.
d. government purchases decrease and shifts left is stock prices fall.
128. Aggregate demand shifts right if at a given price level
a. taxes rise and shifts left if the money supply increases.
b. taxes rise and shifts right if the money supply increases.
c. taxes fall and shifts left if the money supply increases.
d. taxes fall and shifts right if the money supply increases.
8054 Aggregate Demand and Aggregate Supply
129. Which of the following lists includes only changes that shift aggregate demand to the right?
a. repeal of an investment tax credit, an increase in the money supply
b. repeal of an investment tax credit, a decrease in the money supply
c. passing of an investment tax credit, an increase in the money supply
d. passing of an investment tax credit, a decrease in the money supply
130. Which of the following shifts aggregate demand right?
a. both a decrease in the price level and the implementation of an investment tax credit
b. a decrease in the price level but not the implementation of an investment tax credit
c. the implementation of an investment tax credit but not a decrease in the price level
d. neither a decrease in the price level nor the implementation of an investment tax credit