1. Which of the following would cause the aggregate demand curve to s hift to th
ID: 1165028 • Letter: 1
Question
1. Which of the following would cause the aggregate demand curve to s hift to the right? a. an increase in purchases by the federal government b. an increase in real interest rates c. an appreciation of the American dollar d. a decrease in the money supply % this year, and the inflation rate is 3 2. If the nominal interest rate on a checking account is 2% the real interest rate is: a. 5% b. 2% c.2/3% e. 3% 3. Which of the following is not a component of Aggregate Demand? a. Consumption b. Investment c. Saving d. Net Exports e. Government Expenditures 4. An example of a government expenditure is a. employing a public school teacher b. a social security payment to an elderly person. c. an AFDC (Aid to Families with Dependent Children) payment. d. an unemployment insurance check e. All of the above 5. Which of the following events will shift the Aggregate Supply curve to the left? a. real wages rise. b. inflation expectations decrease. c. land costs fall. d. a fall in interest rates e. None of the Above 6. Increase in price of oil will a. increase AD b. increase SRAS c. decrease SRAS d. increase LRAS will result in: 7. All else equal, a decrease in the supply of labor a, decreases in AS which will increase the price level and output. b. inckeases in AS which will increase the price level and decrease output. d, decreases in AS which will decrease the price level and output. e. increases in in AS which will decrease the price level and output. AS which will decrease the price level and increase output.Explanation / Answer
1) Solution: an increase in purchases by the federal government
Explanation: An increase in purchases by the federal government would increase the demand thus causing the aggregate demand curve to shift to the right
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2) Solution: -1%
Explanation: Real Interest Rate = Nominal Interest Rate - Inflation = 2% - 3% = -1%
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3) Solution: Saving
Explanation: AD = C + I + G + ( X-M )
4) Solution: an AFDC (Aid to families with Dependent Children) payment
Explanation: Government expenditures includes purchase of weapons for the military, salaries of public servants, and any investment expenditure by a government. It exclude any transfer payments, such as unemployment benefits or social security.
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