Question

An increase in the price level, other things equal, will shift the _____.

1. consumption, investment, and net exports schedules of the aggregate expenditures model downward
2. consumption, investment, and net exports schedules of the aggregate expenditures model upward
3. consumption and investment schedules of the aggregate expenditures model upward, but the net exports schedule downward
4. consumption and net exports schedules of the aggregate expenditures model upward, but the investment schedule downward

The foreign purchases, interest rate, and real-balances effects explain why the ____________.

1. aggregate demand curve is downward-sloping
2. aggregate demand curve may shift to the left or right
3. economy will adjust towards equilibrium
4. aggregate expenditures schedule may shift up or down

Which of the following events would most likely reduce aggregate demand?

1. A reduction in the amount of existing capital stock.
2. A reduction in business and personal tax rates.
3. An increase in expected returns on investment.
4. An increase in real interest rates.

The long-run aggregate supply curve is _____.

1. upward-sloping and becomes steeper at output levels above the full-employment output
2. upward-sloping and becomes flatter at output levels above the full-employment output
3. horizontal
4. vertical

Answer 1

Correct option is option A. When there is an increase in the price level, wealth is reduced so consumption is reduced. also demand for money increase is which increases the interest rate and reduces investment. This causes imports to increase and exports to falls on net exports also fall

Option A is correct because these are the three determinants of downward sloping aggregate demand function.

Option d is correct. when interest rate increases investment demand decreases and this decreases the aggregate demand

Option D is correct. in the long run aggregate supply can only be increased by change in resources or technology. Therefore it is not related to price and is vertical in nature.