Aggregate Demand and Aggregate Supply
Multiple Choice Questions
1. The aggregate demand curve:
is upsloping because a higher price level is necessary to make production profitable as production
is downsloping because supply costs decline as real output increases.
shows the amount of expenditures required to induce the production of each possible level of real
shows the amount of real output that will be purchased at each possible price level.
6. The foreign purchases effect suggests that an increase in the U.S. price level relative to other countries
increase the amount of U.S. real output purchased.
increase U.S. imports and decrease U.S. exports.
increase both U.S. imports and U.S. exports.
decrease both U.S. imports and U.S. exports.
13. The factors that affect the amounts that consumers, businesses, government, and foreigners wish to
purchase at each price level are the:
real-balances, interest-rate, and foreign purchases effects.
determinants of aggregate supply.
determinants of aggregate demand.
sole determinants of the equilibrium price level and the equilibrium real output.
28. The aggregate supply curve:
is explained by the interest rate, real-balances, and foreign purchases effects.
gets steeper as the economy moves from the top of the curve to the bottom of the curve.
shows the various amounts of real output that businesses will produce at each price level.
is downsloping because real purchasing power increases as the price level falls.
Use the following to answer questions 34-39:
Real domestic output, GDP
34. In the above diagram, a shift from AS1 to AS3 might be caused by a(n):
increase in productivity.
increase in the prices of imported resources.
decrease in the prices of