Aggregate Demand and Supply Quiz

Refer to the following graphs. Which of the graphs correctly labels the axes of the AS-AD model?

Graph (4)

Use the following graph to answer the next question. When output increases from Q1 and the price level decreases from P1, this change will

be caused by a shift in the aggregate supply curve from AS1 to AS3.

Use the following table, which shows the aggregate demand and aggregate supply schedule for a hypothetical economy, to answer the next question. If the quantity of real domestic output demanded increased by $1,000 at each price level, the new equilibrium price level and quantity of real domestic output would be

250 and $2,500.

Use the following graphs to answer the next question. In the diagrams, AD1 and AS1 are the "before" curves. Assuming Y1 is full-employment output, an expansion is depicted by

panel (C) only.

Use the following graph to answer the next question. If current output is Y1 and full-employment output is Y3, then in the long run the short aggregate supply schedule is

AS3.

In which of the following sets of circumstances can we confidently expect inflation?

Aggregate supply decreases and aggregate demand increases.

Use the following diagrams for the U.S. economy to answer the next question. If the economy is initially at full employment, which of the diagrams best portrays a recession resulting from a decrease in government purchases?

Graph (4)

A sharp rise in the real value of stock prices, which is independent of a change in the price level, would best be an example of

a change in real value of consumer wealth.

The intersection of the aggregate demand and aggregate supply curves determines the

equilibrium level of real domestic output and prices.

Use the following graph to answer the next question. In the figure, AD1 and AS1 represent the original aggregate supply and demand curves. If Y1 is full-employment output, then AD2 and AS1 represent a(n)

expansion.

An expected increase in the prices of consumer goods in the near future will

increase (or shift right) in aggregate demand now.

Use the following graph to answer the next question. If aggregate supply shifts from AS1 to AS2, then the price level will

increase and real domestic output will decrease.

The labels for the axes of the aggregate demand graph should be

real domestic output on the horizontal axis and the price level on the vertical axis.

Graphically, demand-pull inflation is shown as a

rightward shift of the AD curve along an upsloping AS curve.

Use the following graph to answer the next question. Which of the following factors does not explain a movement along the AD curve?

the expenditure multiplier effect

In the aggregate demand-aggregate supply model, the economy's price level is assumed to be

variable, unlike in the aggregate expenditures model.

Use the following graph to answer the next question. In the figure, AD1 and AS1 represent the original aggregate supply and demand curves. If Y1 is full-employment output, then the long-run aggregate supply curve is located at output level

Y1.

Cost-push inflation is characterized by a(n)

decrease in aggregate supply and no change in aggregate demand.

Use the following figure to answer the next question. Suppose the economy is currently at full employment with aggregate demand curve AD2. A further increase in consumption and investment spending will cause

demand-pull inflation, and the new equilibrium output will be more than Y2.

An increase in personal income taxes would shift AD to the

left because C will decrease.

A decrease in expected returns on investment will most likely shift the AD curve to the

left because Ig will decrease.

Graphically, cost-push inflation is shown as a

leftward shift of the AS curve.

The real-balances effect on aggregate demand suggests that a

lower price level will increase the real value of many financial assets and therefore cause an increase in spending.

Use the following graph to answer the next question. It depicts an economy in the

short run.