7.) Draw a graph with the Aggregate Demand curve. Indicate the vertical and horizontal axes. This graph clearly shows the shift of the curve when consumer confidence falls. How such a shift will impact RGDP.

Section I: Multiple-Choice Questions 1) 2) 3) 4) 3) During the expansion phase of the business cycle, A) employment decreases. B) income decreases. C) unemployment increases. D) production increases. Because of the slope of the aggregate demand curve, we can say that A) adecrease in the price level leads to a higher level of aggregate spending. B) a decrease in the price level leads to a lower level of aggregate spending. C) a decrease in the price level leads to a higher level of aggregate supply. D) an increase in the price level leads to a higher level of aggregate spending. The interest rate effect is described as an increase in the price level which A) lowers the interest rate thereby reducing government spending. B) lowers the interest rate thereby reducing investment and consumption spending. C) raises the interest rate thereby reducing government spending,. D) raises the interest rate thereby reducing investment and consumption spending. The international trade effect states that A) an increase in the price level will raise net exports. B) an increase in the price level will lower net exports. C) an increase in the price level will raise exports. D) an increase in the price level will lower imports. Which of the following will shift the aggregate demand curve to the right, ceteris paribus? A) an increase in interest rates B) a decrease in disposable income C) a decrease in expected profits for firms D) an increase in net exports A decrease in aggregate demand results in a(n) intheli il A) recession; long run B) expansion; long run C) expansion; short run D) recession; short run