Question: The real-balances effect on aggregate demand suggests that a:

Answer: Lower price level will increase the real value of many financial assets and therefore cause an increase in spending

Question: A decrease in government spending will cause a(n):

Answer: Decrease in aggregate demand

Question: An increase in productivity will:

Answer: Increase aggregate supply

Question: An increase in personal income tax rates will cause a(n):

Answer: Decrease (or shift left) in aggregate demand

Question: An expected increase in the prices of consumer goods in the near future will:

Answer: Increase (or shift right) in aggregate demand now

Question: An increase in net exports will shift the:

Answer: aggregate demand curve upward and rightward.

Question: Graphically, cost-push inflation is shown as a:

Answer: leftward shift of the AS curve.

Question: A decrease in expected returns on investment will most likely shift the AD curve to the:

Answer: Left because investment will decrease

Question: Graphically, demand-pull inflation is shown as a:

Answer: rightward shift of the AD curve.

Question: An increase in expected future income will:

Answer: Increase aggregate demand