Aggregate Demand And Supply

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Quizzes Created: 1 | Total Attempts: 285
| Attempts: 285
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  • 1/8 Questions
    Refer to the diagram. If Q1 represents the full-employment output, then the curve labeled B is the: - ProProfs

    Refer to the diagram. If Q1 represents the full-employment output, then the curve labeled B is the:

    • LRAS curve
    • SRAS curve
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About This Quiz

This quiz focuses on Aggregate Demand and Supply in macroeconomics, exploring scenarios like demand shifts, supply curve movements, and fiscal policy impacts. It assesses understanding of economic equilibrium, inflation control, and employment levels, crucial for students and professionals in economics.

Aggregate Demand And Supply - Quiz

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  • 2. 
    Refer to the diagram. Assume that wages are initially set on the basis of price level P1 and that the economy is operating at its full-employment level of Qf. The short-run effect of an increase in demand is best reflected by a move from: - ProProfs

    Refer to the diagram. Assume that wages are initially set on the basis of price level P1 and that the economy is operating at its full-employment level of Qf. The short-run effect of an increase in demand is best reflected by a move from:

    • Point e to point g

    • Point e to point b

    • Point e to point a

    • Point e to point c

    Correct Answer
    A. Point e to point g
    Explanation
    In the diagram, point e represents the initial equilibrium where wages are set based on price level P1 and the economy is operating at full employment level Qf. An increase in demand will lead to an increase in output and employment in the short run. This will cause a shift in the aggregate demand curve to the right, resulting in a move from point e to point g. At point g, both output and price level will be higher than at point e, reflecting the short-run effect of an increase in demand.

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  • 3. 

    If the economy is initially at a point on its long-run aggregate supply curve, a decrease in aggregate demand will:

    • Permanently increase unemployment

    • Temporarily increase unemployment

    • Permanently increase inflation

    • Temporarily increase inflation

    Correct Answer
    A. Temporarily increase unemployment
    Explanation
    A fall in aggregate demand will temporarily reduce the rate of inflation and increase unemployment.

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  • 4. 

    Refer to the diagram above. If P1 is the price level and Qf is the full-employment output, then the long-run aggregate supply curve:

    • Is AS1

    • Connects points a and e

    • Is AS2

    • Connects points e, b, and d

    Correct Answer
    A. Connects points e, b, and d
    Explanation
    The long-run aggregate supply curve connects points e, b, and d because these points represent different levels of output at the full-employment level. Point e represents the full-employment output level, while points b and d represent output levels above and below full employment, respectively. The curve connects these points to show the relationship between price level and output in the long run.

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  • 5. 
    Refer to the diagram. Assume aggregate demand is initially given by AD1 and cost-push inflation pushes the aggregate supply curve from AS1 to AS2. If the government uses fiscal policy to restrain the inflation: - ProProfs

    Refer to the diagram. Assume aggregate demand is initially given by AD1 and cost-push inflation pushes the aggregate supply curve from AS1 to AS2. If the government uses fiscal policy to restrain the inflation:

    • Aggregate demand will increase to AD2

    • Aggregate supply will shift even further to the left

    • Aggregate demand will shift to the left

    • The economy will move from point b to point a

    Correct Answer
    A. Aggregate demand will shift to the left
    Explanation
    If the government uses fiscal policy to restrain inflation, it will typically involve reducing government spending and/or increasing taxes. This will lead to a decrease in aggregate demand as consumers and businesses have less money to spend. As a result, the aggregate demand curve will shift to the left, causing a decrease in overall spending in the economy.

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  • 6. 
    Refer to the diagram. Assume the economy is initially at point a. A movement to point b might be caused by: - ProProfs

    Refer to the diagram. Assume the economy is initially at point a. A movement to point b might be caused by:

  • 7. 

    What is Aggregate Demand?

  • 8. 

    What is Aggregate Supply?

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  • Current Version
  • Mar 21, 2023
    Quiz Edited by
    ProProfs Editorial Team
  • Apr 28, 2010
    Quiz Created by
    Jessicaann471
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