Aggregate Demand Quiz.

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Rose Hawkins
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1 Aggregate Demand Quiz

2 What does aggregate demand express? (A) The quantity of goods and services demanded in an economy (B) The quantity of goods and services produced in an economy (C) The quantity of goods produced in an economy (D) The quantity of services demanded in an economy What is the aggregate demand curve most similar to? (A) A demand schedule (B) The demand curve for a firm (C) A demand system (D) The supply curve for a firm Which of the following sources of purchases is not included in aggregate demand? (A) Businesses (B) Consumers (C) Foreigners (D) Government What is the horizontal axis of the aggregate demand curve? (A) Interest rate (B) Price level (C) Inputs (D) Output or income What is the vertical axis of the aggregate demand curve? (A) Price level (B) Income (C) Output (D) Interest rate

3 When the price level is high, what is aggregate demand? (A) High (B) Low (C) Unchanged (D) Need more information When the price level is low, what is aggregate demand? (A) High (B) Low (C) Unchanged (D) Need more information What is the general slope of the aggregate demand curve? (A) Horizontal (B) Vertical (C) Upwards (D) Downwards What is the general equation for aggregate demand? (A) Y = C(Y - T) + I(r) + G + NX(e) (B) Y = C(Y - T) + I(r) + G (C) Y = C(Y - T) + I(r) + NX(e) (D) Y = C(Y - T) + G + NX(e) The term C(Y - T) means that consumption is dependant upon what? (A) Income (B) Disposable income (C) Taxes (D) Output

4 The term I(r) means that investment is dependent upon what? (A) Real income (B) Disposable income (C) Real interest rate (D) Real exchange rate The term NX(e) means that net exports are dependent upon what? (A) Nominal interest rate (B) Real interest rate (C) Nominal exchange rate (D) Real exchange rate What does the real exchange rate represent? (A) The rate at which the goods from one country can be traded for the goods of another country (B) The rate at which the goods from one country can be purchased from another country (C) The rate at which the goods from one country can be traded for goods of that country (D) The rate at which the goods from one country can be purchased in another country What economic number can be derived from output? (A) Standard of living (B) National income (C) GDP per capita (D) Nominal GDP

5 What area of aggregate demand would movie tickets fall under? (A) Net exports (B) Investment (C) Consumption (D) Government spending What are of aggregate demand would social security fall under? (A) Net exports (B) Investment (C) Consumption (D) Government spending What are of aggregate demand would raw materials shipped to Asia fall under? (A) Net exports (B) Investment (C) Consumption (D) Government spending What are of aggregate demand would new housing fall under? (A) Net exports (B) Investment (C) Consumption (D) Government spending Which of the following would not be considered consumption under aggregate demand? (A) Books (B) Movie tickets (C) New houses (D) Food

6 Which of the following would not be considered investment under aggregate demand? (A) Education (B) Machinery (C) Factories (D) Used housing Which of the following types of economic activity are not represented in aggregate demand? (A) Aid from foreigners (B) Aid to foreigners (C) Government transfers (D) Consumption spending Which model of aggregate demand is based upon exchange rates? (A) Laffer model (B) Mundell-Fleming model (C) Keynes model (D) Pigou model Which of the aggregate demand models is based on investment spending? (A) Laffer model (B) Mundell-Fleming model (C) Keynes model (D) Pigou model Which of the aggregate demand models is based on consumption spending? (A) Laffer model (B) Mundell-Fleming model (C) Keynes model (D) Pigou model

7 Which of the following is not a model of aggregate demand? (A) Laffer model (B) Mundell-Fleming model (C) Keynes model (D) Pigou model What is the effect of a decrease in the price level on wealth? (A) It decreases wealth (B) It increases wealth (C) It has not effect on wealth (D) It has an indeterminate effect on wealth When consumers feel or become wealthier, what is the effect on consumption spending? (A) It increases consumption spending (B) It decreases consumption spending (C) It has no effect on consumption spending (D) It has an indeterminate effect on consumption spending What is the effect of a high price level on interest rates? (A) Interest rates tend to be low (B) Interest rates tend to be high (C) There is no relationship between the price level and interest rates (D) Need more information Which of the following is not related to the interest rate? (A) The price of output (B) The price of consumption (C) The price of loans (D) The price of investment

8 What happens when the domestic interest rate is lower than foreign interest rates? (A) Foreign investment shift domestically (B) Domestic investment shifts abroad (C) Domestic investment is unchanged (D) Foreign investment is unchanged When the real exchange rate decreases, what happens to net exports? (A) Net exports are unaffected (B) Net exports fall (C) Net exports rise (D) Net exports fall sometimes and rise other times What is the horizontal axis of the IS-LM model? (A) Interest rate (B) Growth rate (C) Exchange rate (D) Income and output What is the vertical axis of the IS-LM model? (A) Interest rate (B) Exchange rate (C) Income and output (D) Growth rate Which market does the IS curve reflect? (A) The money market (B) The market for goods and services (C) The market for exports (D) The market for imports

9 Which market does the LM curve reflect? (A) The market for goods and services (B) The money market (C) The market for imports (D) The markets for exports Which direction does the IS curve slope? (A) Horizontal (B) Vertical (C) Upward (D) Downward Which direction does the LM curve slope? (A) Upward (B) Downward (C) Horizontal (D) Vertical Why is the LM curve upward sloping? (A) Because higher income leads to lower money demand which leads to lower interest rates (B) Because higher income leads to higher money demand which leads to higher interest rates (C) Because lower income leads to higher money demand which leads to higher interest rates (D) Because lower income leads to lower money demand which leads to higher interest rates

10 Why is the IS curve downward sloping? (A) Because as the interest rate rises, investment increases, thus increasing output (B) Because as the interest rate rises, investment decreases, thus increasing output (C) Because as the interest rate falls, investment increases, thus increasing output (D) Because as the interest rate falls, investment decreases, thus increasing output What is an example of an exogenous change in the IS-LM model? (A) Changes in output (B) Changes in the money supply (C) Changes in the interest rate (D) Changes in tastes When the price level increases, which direction does the LM curve shift? (A) Inward (B) Outward (C) Upward (D) None of the above What happens when the aggregate demand curve shifts left? (A) Output increases at all price levels (B) Output decreases at all price levels (C) Input increases at all price levels (D) Input decreases at all price levels What happens when the aggregate demand curve shifts right? (A) Input increases at all price levels (B) Input decreases at all price levels (C) Output increases at all price levels (D) Output decreases at all price levels

11 When disposable income falls, what happens to the aggregate demand curve? (A) It shifts left (B) It shifts right (C) It is inverted (D) It does not change When happens to the aggregate demand curve when the savings rate increases? (A) It shifts left (B) It shifts right (C) It is inverted (D) It does not shift What happens to the aggregate demand curve when government spending increases? (A) It shifts left (B) It shifts right (C) It does not shift (D) It is inverted What happens to the aggregate demand curve when the real exchange rate rises? (A) It is inverted (B) It does not shift (C) It shifts left (D) It shifts right

12 What happens to the aggregate demand curve when the marginal propensity to consume increases? (A) It is inverted (B) It does not shift (C) It shifts left (D) It shifts right What other curve is required to complete the AS-AD model? (A) Aggregate supply (B) Aggregate demand (C) IS (D) LM What information can be obtained from the AS-AD model of the economy? (A) Equilibrium in the foreign market for goods and services (B) Equilibrium in the domestic market for goods and services (C) Changes in the domestic market for goods only (D) Changes in the foreign market for goods only

The goods market. Screen 1

The goods market. Screen 1 The goods market Screen 1 In this presentation we take a closer look at the goods market and in particular how the demand for goods determines the level of production and income in the goods market. There