Practice Questions
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What does an increase in aggregate demand typically lead to in the short run, assuming aggregate supply remains constant?
When people want to buy more goods and services, businesses produce more. Other options are incorrect because Some might think that more demand means ...
How does an increase in government spending (a fiscal policy) affect the long-run aggregate supply in an economy?
When the government spends more, it can help businesses grow. Other options are incorrect because Some might think that more spending makes resources ...
How does a leftward shift in the aggregate supply curve typically affect the economy during a period of cost-push inflation?
When the aggregate supply curve shifts left, it means that production costs are rising. Other options are incorrect because Some might think that a le...
How does an increase in government spending, a component of fiscal policy, influence the aggregate demand curve in the context of the aggregate supply and demand analysis?
When the government spends more money, it puts more cash into the economy. Other options are incorrect because Some might think that more spending mea...
How does a significant increase in production costs affect the Aggregate Supply Curve and what impact does this have on the Aggregate Demand Curve, particularly in the context of cost-push inflation?
When production costs go up, it becomes more expensive for companies to make goods. Other options are incorrect because Some might think that changes ...
What does the aggregate demand curve represent in an economy?
The aggregate demand curve shows how much people want to buy at different prices. Other options are incorrect because This option confuses demand with...
What does the Aggregate Supply Curve represent in an economy?
The Aggregate Supply Curve shows how much stuff businesses are ready to make at different prices. Other options are incorrect because This answer conf...
What is the equilibrium price level in the context of aggregate supply and demand analysis?
The equilibrium price is where the amount of goods people want to buy equals the amount producers want to sell. Other options are incorrect because Th...
If aggregate demand increases while aggregate supply remains constant, what is the likely outcome for the economy?
When people want to buy more goods and services, businesses see a chance to make more money. Other options are incorrect because Some might think that...
In the context of aggregate supply and demand, when the economy is experiencing a recession, an increase in __________ can help shift the aggregate demand curve to the right, potentially increasing both output and the price level.
When the government spends more money, it puts cash into the economy. Other options are incorrect because Some might think that increasing supply will...
Arrange the following steps in the correct sequence to analyze the impact of an increase in aggregate demand on the economy's equilibrium output and price level: A) Identify the new equilibrium price level and output. B) Determine the initial position of aggregate demand and supply. C) Shift the aggregate demand curve to the right. D) Analyze the short-run and long-run effects on the economy.
First, you need to see where the economy starts. Other options are incorrect because This option suggests shifting the demand curve before knowing the...
If an economy experiences a significant increase in consumer confidence, which of the following is most likely to occur in the short run?
When people feel good about the economy, they spend more money. Other options are incorrect because Some might think that higher confidence leads to l...
If the aggregate demand in an economy increases significantly, what is the most likely immediate effect on the equilibrium price level?
When more people want to buy goods and services, businesses see higher demand. Other options are incorrect because This answer suggests that prices dr...
Which of the following statements accurately describe the interactions between aggregate supply and aggregate demand in determining equilibrium output and price levels? Select all that apply.
Other options are incorrect because Some might think that higher demand always means higher prices and output; It's a common belief that less supply a...
A government decides to increase spending on infrastructure projects. How would this action likely affect the aggregate demand and what would be the expected impact on the equilibrium price level and output in the short run?
When the government spends more on infrastructure, it creates jobs and boosts demand. Other options are incorrect because This answer suggests that de...
Aggregate Demand : Economic Growth :: Aggregate Supply : ?
When aggregate supply meets aggregate demand, we reach market equilibrium. Other options are incorrect because Some might think that price stability i...
A country's government decides to increase its export subsidies to stimulate economic growth. How would this action likely impact the aggregate demand and supply in the short run, and what would be the likely effect on equilibrium output and price levels?
When the government gives more money to help businesses sell goods abroad, it encourages them to produce more. Other options are incorrect because Som...
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