Question 1

If the dollar depreciates because of speculation or government policy, U.S.
A)aggregate demand shifts left. U.S. aggregate demand also shifts left if other countries experience an increase in real GDP.
B)aggregate demand shifts left. U.S. aggregate demand shifts right if other countries experience an increase in real GDP.
C)aggregate demand shifts right. U.S. aggregate demand also shifts right if other countries experience a decrease in real GDP.
D)aggregate demand shifts right. U.S. aggregate demand shifts left if other countries experience a decrease in real GDP.

Accepted Answer

The answer of If the dollar depreciates because of speculation...

Question 2

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

Accepted Answer

Passing of an investment tax credit and an increase in the money supply both increase aggregate demand by increasing consumption and investment spending.

Question 3

Other things the same, which of the following is correct?
A)A decrease in the price level causes the dollar to appreciate. Aggregate demand shifts right.
B)A decrease in the price level causes the dollar to depreciate. Aggregate demand shifts right.
C)If speculators lose confidence in the American economy, the dollar appreciates. Aggregate demand shifts right.
D)If speculators lose confidence in the American economy, the dollar depreciates. Aggregate demand shifts right.

Accepted Answer

The answer of Other things the same, which of the...

Question 4

At the end of World War II many European countries were rebuilding and so were eager to buy capital goods and had rising incomes. We would expect that the rebuilding increased aggregate demand in
A)both the United States and Europe.
B)the United States but not Europe.
C)Europe, but not the United States.
D)neither the United States, nor Europe.

Accepted Answer

The rebuilding efforts in Europe led to a high demand for capital goods and rising incomes, which in turn increased their purchasing power. This led to an increase in demand for American goods, hence increasing aggregate demand in both the United States and Europe.

Question 5

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.

Accepted Answer

An increase in money supply will increase consumption and investment expenditures, leading to an increase in aggregate demand, shifting it to the right. A decrease in taxes will increase disposable income, leading to an increase in consumption expenditure; however, it will also decrease government revenue, leading to a decrease in government expenditure, leading to a shift to the left. Therefore, the only correct answer is D, as it states that a decrease in taxes and an increase in money supply will shift aggregate demand to the right.

Question 6

If the dollar appreciates, perhaps because of speculation or government policy, then U.S. net exports
A)increase which shifts aggregate demand right.
B)increase which shifts aggregate demand left.
C)decrease which shifts aggregate demand right.
D)decrease which shifts aggregate demand left.

Accepted Answer

If the dollar appreciates, it becomes more expensive for foreign buyers to purchase U.S. goods and services. This decreases U.S. net exports, which means that there is a decrease in the amount of goods and services that the U.S. is selling to other countries. As a result, aggregate demand shifts leftward.

Question 7

Which of the following is correct?
A)An increase in the money supply causes the interest rate to decrease so that aggregate demand shifts left.
B)An increase in stock prices reduces consumption spending so that aggregate demand shifts left.
C)An increase in the price level causes the exchange rate to rise so that aggregate demand shifts left.
D)A recession in other countries reduces U.S. net exports so that U.S. aggregate demand shifts left.

Accepted Answer

A recession in other countries reduces their demand for U.S. goods and services, thus reducing U.S. net exports and shifting U.S. aggregate demand left. Option A is incorrect because an increase in the money supply causes the interest rate to decrease, which increases investment spending and shifts aggregate demand right. Option B is incorrect because an increase in stock prices typically increases wealth and consumer confidence, leading to an increase in consumption spending and a shift in aggregate demand right. Option C is incorrect because an increase in the price level causes the exchange rate to fall, making exports cheaper and increasing net exports, which shifts aggregate demand right.

Question 8

If countries that imported goods and services from the United States went into recession, we would expect that U.S. net exports would
A)rise, making aggregate demand shift right.
B)rise, making aggregate demand shift left.
C)fall, making aggregate demand shift right.
D)fall, making aggregate demand shift left.

Accepted Answer

If countries that import goods and services from the United States go into recession, their demand for U.S. exports is likely to fall. This means that U.S. net exports would decrease, causing a shift in aggregate demand to the left.

Question 9

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.

Accepted Answer

According to the question, aggregate demand (AD) shifts left, which means there is a decrease in AD. Government purchases (G) affect AD positively, so if G decreases, AD will shift left. On the other hand, stock prices (SP) affect AD negatively, so if SP falls (decreases), AD will shift right. Therefore, the only option that satisfies both conditions for a shift to the left is if government purchases decrease and stock prices fall. The correct answer is D.

Question 10

If banks and speculators in the U.S. decided to exchange U.S. dollars for the foreign currencies of other countries, but foreigners do not desire to increase their holdings of U.S. dollars, then U.S. net exports would
A)rise and aggregate demand would shift left.
B)rise and aggregate demand would shift right.
C)fall and aggregate demand would shift left.
D)fall and aggregate demand would shift right.

Accepted Answer

The answer of If banks and speculators in the U.S....

Question 11

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.

Accepted Answer

The answer of Aggregate demand shifts right if
A)government purchases increase...

Question 12

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

Accepted Answer

The answer of Which of the following shifts aggregate demand...

Question 13

Refer to Political Instability Abroad. What would happen to the dollar?
A)It would appreciate in foreign exchange markets making U.S goods more expensive compared to foreign goods.
B)It would appreciate in foreign exchange markets making U.S. goods less expensive compared to foreign goods.
C)It would depreciate in foreign exchange markets making U.S. goods more expensive compared to foreign goods.
D)It would depreciate in foreign exchange markets making U.S. goods less expensive compared to foreign goods.

Accepted Answer

Political instability abroad often leads to an appreciation of the dollar as investors seek a safe haven, making U.S. goods more expensive compared to foreign goods.

Question 14

The aggregate demand curve shifts left if either
A)speculators gain confidence in U.S. assets or foreign countries enter into recession.
B)speculators gain confidence in U.S. assets or recessions in foreign countries end.
C)speculators lose confidence in U.S. assets or foreign countries enter into recession.
D)speculators lose confidence in U.S. assets or recessions in foreign countries end.

Accepted Answer

The answer of The aggregate demand curve shifts left if...

Question 15

If speculators bid up the value of the U.S. dollar in the market for foreign exchange, then
A)U.S. goods become more expensive relative to foreign goods so aggregate demand shifts right.
B)U.S. goods become less expensive relative to foreign goods so aggregate demand shifts right.
C)U.S. goods become more expensive relative to foreign goods so aggregate demand shifts left.
D)U.S. goods become less expensive relative to foreign goods so aggregate demand shifts left.

Accepted Answer

If speculators bid up the value of the U.S. dollar in the foreign exchange market, it means that the U.S. dollar becomes stronger compared to foreign currencies. This makes U.S. goods more expensive relative to foreign goods, which can lead to a decrease in demand for U.S. exports and an increase in demand for imports. As a result, aggregate demand in the U.S. shifts left.

Question 16

If speculators gained greater confidence in foreign economies so that they wanted to buy more assets of foreign countries and fewer U.S. bonds,
A)the dollar would appreciate which would cause aggregate demand to shift right.
B)the dollar would appreciate which would cause aggregate demand to shift left.
C)the dollar would depreciate which would cause aggregate demand to shift right.
D)the dollar would depreciate which would cause aggregate demand to shift left.

Accepted Answer

The answer of If speculators gained greater confidence in foreign...

Question 17

If speculators lost confidence in foreign economies and so wanted to buy more U.S. bonds
A)the dollar would appreciate which would cause aggregate demand to shift right.
B)the dollar would appreciate which would cause aggregate demand to shift left.
C)the dollar would depreciate which would cause aggregate demand to shift right.
D)the dollar would depreciate which would cause aggregate demand to shift left.

Accepted Answer

The answer of If speculators lost confidence in foreign economies...

Question 18

At a given price level, an increase in which of the following shifts aggregate demand to the right?
A)consumption
B)investment
C)government expenditures
D)All of the above are correct.

Accepted Answer

An increase in any of the given factors (consumption, investment, government expenditures) will lead to an increase in aggregate demand, shifting the aggregate demand curve to the right. Therefore, all of the choices are correct.

Question 19

In which case can we be sure aggregate demand shifts left overall?
A)people want to save more for retirement and the Fed increases the money supply.
B)people want to save more for retirement and the Fed decreases the money supply.
C)people want to save less for retirement and the Fed increases the money supply.
D)people want to save less for retirement and the Fed decreases the money supply.

Accepted Answer

When people want to save more for retirement, they will spend less, causing a decrease in consumption and thus decreasing aggregate demand. If the Fed decreases the money supply, this will also decrease aggregate demand because there will be less money available for spending. Therefore, in the case of people wanting to save more for retirement and the Fed decreasing the money supply, we can be sure that aggregate demand will shift left overall.

Question 20

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.

Accepted Answer

Both an increase in net exports (for reasons other than price change) and an increase in government purchases will shift aggregate demand to the right. This is because an increase in net exports means that foreign buyers are purchasing more goods and services from domestic producers, increasing overall demand in the economy. An increase in government purchases means that the government is purchasing more goods and services, increasing demand in the economy as well.

Quiz 33: Aggregate Demand and Aggregate Supply

If the dollar depreciates because of speculation or government policy, U.S.

Which of the following lists includes only changes that shift aggregate demand to the right?

Other things the same, which of the following is correct?

At the end of World War II many European countries were rebuilding and so were eager to buy capital goods and had rising incomes. We would expect that the rebuilding increased aggregate demand in

Aggregate demand shifts right if at a given price level

If the dollar appreciates, perhaps because of speculation or government policy, then U.S. net exports

Which of the following is correct?

If countries that imported goods and services from the United States went into recession, we would expect that U.S. net exports would

Aggregate demand shifts left if

If banks and speculators in the U.S. decided to exchange U.S. dollars for the foreign currencies of other countries, but foreigners do not desire to increase their holdings of U.S. dollars, then U.S. net exports would

Aggregate demand shifts right if

Which of the following shifts aggregate demand right?

Refer to Political Instability Abroad. What would happen to the dollar?

The aggregate demand curve shifts left if either

If speculators bid up the value of the U.S. dollar in the market for foreign exchange, then

If speculators gained greater confidence in foreign economies so that they wanted to buy more assets of foreign countries and fewer U.S. bonds,

If speculators lost confidence in foreign economies and so wanted to buy more U.S. bonds

At a given price level, an increase in which of the following shifts aggregate demand to the right?

In which case can we be sure aggregate demand shifts left overall?

Which of the following both shift aggregate demand right?