Question

1. A shift of the aggregate demand curve to the right will have the greatest impact on the price level if __________.
   1. the aggregate supply curve is upward sloping
   2. the aggregate supply curve is vertical
   3. the aggregate supply curve is horizontal
   4. the aggregate demand curve is very steep
2. When will the AS curve be vertical?
   1. when output and price level rise together
   2. when the economy is operating at capacity
   3. when aggregate demand is absent
   4. when the aggregate demand curve shifts to the left
3. Transfer payments are included in __________.
   1. the NNP and the GDP
   2. the NNP but not the GDP
   3. personal income but not national income
   4. national income but not personal income
4. An economist would surmise that if unemployment exists, then a nation is __________.
   1. not operating on its production possibilities curve
   2. moving beyond its production possibilities curve
   3. experiencing a healthy market economy
   4. facing an imminent recession or depression
5. The slope of the aggregate supply (AS) curve __________.
   1. depends on the interest rate
   2. depends on household spending
   3. can be vertical, horizontal, or upward
   4. is always downward
6. Tomas is an economist who specializes in evaluating and comparing aggregate supply curves. This type of economic curve relates __________.
   1. real output to the price level
   2. nominal output to the price level
   3. real output to the level of consumer spending
   4. all market supply curves to each other
7. The sum of a country’s rent, wages, interest, profits, and proprietors’ income make up its __________.
   1. national income
   2. assets
   3. net national product
   4. GDP
8. A higher price level combined with less aggregate demand leads to all of the following EXCEPT __________.
   1. a fall in the value of household assets
   2. fewer net exports and more foreign imports
   3. an increase in interest rates
   4. a decrease in tax collections
9. Aggregate supply shifts the LEAST in response to changes in __________.
   1. resource availability
   2. tax incentives
   3. technology
   4. exchange rates
10. The consumer price index (CPI) is based on changes in the __________.
    1. cost of all goods that enter into the GDP
    2. cost of a market basket of typical buyer goods
    3. prices consumers are willing to pay
    4. average consumer’s nominal income

Answer 1

The shift of the aggregate demand curve to the right will have the greatest impact if the aggregate supply curve is horizontal. Horizontal aggregate supply means that any quantity can be produced at the same price. A rightwards shift of the aggregate demand means that the demand increases in the economy. Now, if the economy can produce any amount then this shift will have the greatest impact as the output produced will increase by the same amount the aggregate demand increases. So, the correct answer is 'Option C'.