Multiple Choice Questions:
1. The largest component of aggregate demand is?
a. Government purchases.
b. Net exports.
c. Consumption.
d. Investment.
2. A reduction in personal income taxes, other things being equal, will?
a. Leave consumers with less disposable income.
b. Decrease aggregate demand.
c. Leave consumers with more disposable income.
d. Increase aggregate demand.
e. Do both c and d.
3. Aggregate demand is the sum of ____________?
a. C + I + G
b. C + I + G + X
c. C + I + G + (X – M)
d. C + I + G + (X + M)
4. Empirical evidence suggests that consumption____________with any____________?
a. Decreases; increase in income
b. Decreases; tax cut
c. Increases; decrease in consumer confidence
d. Increases; increase in income
e. Both a and b are true.
5. Investment (I) includes?
a. The amount spent on new factories and machinery.
b. The amount spent on stocks and bonds.
c. The amount spent on consumer goods that last more than one year.
d. The amount spent on purchases of art.
e. All of the above.
6. If private consumption in the United States were 67 percent of GDP, investment were 16 percent, government purchases were 13 percent, exports were 12 percent, and imports were 8 percent, net exports would be equal to ____________ percent of GDP?
a. 4
b. –4
c. 20
d. –20
e. none of the above
7. If our exports of final goods and services increase more than our imports, other things being equal, aggregate demand will?
a. Increase.
b. Be negative.
c. Decrease by the change in net exports.
d. Stay the same.
e. Do none of the above.
8. The aggregate demand curve?
a. Is negatively sloped.
b. Demonstrates an inverse relationship between the price level and real gross domestic product demanded.
c. Shows how real gross domestic product demanded changes with the changes in the price level.
d. All of the above are correct.