Aggregate Demand (AD)

Question 1(Multiple Choice Worth 5 points)

(03.01 MC)

When the overall price level increases, it decreases the value of domestic consumers' assets, known as __________, and also decreases the purchasing power of consumers from other countries, which is known as _________

the foreign trade effect; the real wealth effect

the foreign trade effect; comparative advantage

the real wealth effect; the foreign trade effect

the interest rate effect; the real wealth effect

the interest rate effect; comparative advantage

Question 2(Multiple Choice Worth 5 points)

(03.01 MC)

The aggregate demand model dictates that given a price level increase in an economy,

the aggregate demand will shift left

the aggregate demand will shift right

the aggregate quantity demanded of goods and services will increase

the aggregate quantity demanded of goods and services will decrease

the nominal GDP will increase

Question 3

A change in the price level increases the costs of new loans, decreasing the quantity of private business investment. This is known as

the real wealth effect

the exchange rate effect

the interest rate effect

the law of increasing opportunity costs

the substitute effect

Question 4

A Price Level B D C AD, AD. AD. 2 0 Real GDP