1)A cut in government spending, a decrease in income abroad, an increase in taxe

Question

1)A cut in government spending, a decrease in income abroad, an increase in taxes, or an expectation that future consumer income will fall will all cause aggregate:

A) demand to shift outward

B) demand to shift inward

C) supply to shift outward

D) supply to shift inward

E) supply and aggregate demand to both shift equally inward

2) Along the classical or vertical range of the aggregate supply curve, an increase in the aggregate demand curve will increase:

A) both the price level and real GDP

B)only real GDP

C)only the price level

D)real GDP and reduce the price level

3)Using the AD-AS model, if consumers and business become more optimistic about the future direction of the economy and increase spending, then:

A) aggregate demand will decrease

B)aggregate demand will increase

C)long-run aggregate supply will increase

D)long-run aggregate supply will decrease

Explanation / Answer

1)this situation causes less money supply in the country which makes the demand fall and hence demand shifts inward.so the ans is B 1)B

2)this will increase demand as demand increases more supply is created and also the price of goods will increase hence the GDP increases so the ans is A 2)A

3)then the supply becomes high and the aggregate demand decreases hence the ans is A 3)A

cheers :)

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