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Money, Banking, and Financial Markets Practice Test: Aggregate Demand and Supply Analysis
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Aggregate demand and aggregate supply are macroeconomic concepts that describe the relationship between the total demand and supply of goods and services in an economy. The aggregate demand-aggregate supply (AD-AS) model shows how these two concepts interact and how they change during an economic boom or recession. The model is represented graphically, with price level on the Y-axis and real GDP on the X-axis.  Aggregate demand: The total amount of spending people are willing to make on domestic goods and services at a given price level. This includes consumer spending, business spending,... Show more
Money, Banking, and Financial Markets Practice Test: Aggregate Demand and Supply Analysis
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25 Questions

1. According to aggregate demand and supply analysis, Americaʹs involvement in the VietnamWar had the effect of
2. By looking at aggregate demand via its component parts, we can conclude that the aggregate demand curve is downward sloping because
3. Everything else held constant, if workers expect an increase in the price level, ________ aggregate supply ________.
4. Suppose the economy is producing at the natural rate of output. An increase in consumer and business confidence will cause ________ in real GDP in the short run and ________ in the aggregate price level in the short run, everything else held constant.
5. Everything else held constant, aggregate demand increases when
6. Assuming the economy is starting at the natural rate of output and everything else held constant, the effect of ________ in aggregate ________ is a rise in both the price level and output in the short-run, but in the long-run the only effect is a rise in the price level.
7. Everything else held constant, a decrease in net taxes ________ aggregate ________.
8. Everything else held constant, an increase in government spending ________ aggregate________.
9. Suppose the economy is producing at the natural rate of output. An open market sale of bonds by the Fed will cause ________ in real GDP in the long run and ________ in the aggregate price level in the long run, everything else held constant.
10. Suppose the economy is producing at the natural rate of output. An open market purchase of bonds by the Fed will cause ________ in real GDP in the long run and ________ in the aggregate price level in the long run, everything else held constant.
11. A group of economists believe that the natural rate of output is affected by aggregate ________ shocks. They contend that the natural rate level of unemployment and output are subject to________, a departure from full employment levels as a result of past high unemployment.
12. One way to derive aggregate demand is by looking at its four component parts, which are:
13. The total quantity of an economyʹs final goods and services demanded at different price levels is
14. According to the quantity theory of money, an increase in the money supply ________ aggregate________, everything else held constant.
15. If workers demand and receive higher real wages (a successful wage push), the cost of production ________ and the short-run aggregate supply curve shifts ________.
16. The long-run rate of unemployment to which an economy always gravitates is the
17. According to aggregate demand and supply analysis, the negative supply shocks of 1973 -1975 and 1978-1980 had the effect of
18. Everything else held constant, a change in workersʹ expectations about the aggregate price level will cause ________ to change.
19. The aggregate demand curve is the total quantity of an economyʹs
20. A theory of aggregate economic fluctuations called real business cycle theory holds that
21. Everything else held constant, a decrease in the cost of production ________ aggregate ________.
22. Suppose the economy is producing at the natural rate of output. An increase in consumer and business confidence will cause ________ in real GDP in the long run and ________ in the aggregate price level in the long run, everything else held constant.
23. Suppose the economy is producing at the natural rate of output. Assuming a fixed natural rate of output and everything else held constant, the development of a new, more productive technology will cause ________ in the unemployment rate in the long run and ________ in the aggregate price level in the short run.
24. Suppose the economy is producing at the natural rate of output. Assuming a fixed natural rate of output and everything else held constant, the development of a new, more productive technology will cause ________ in the unemployment rate and ________ in the aggregate price level in the long run.
25. Because shifts in aggregate demand are not viewed as being particularly important to aggregate output fluctuations, they do not see much need for activist policy to eliminate high unemployment. ʺTheyʺ refers to proponents of

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