Question

The given statements pertain to aggregate supply and aggregate demand. Label each statement as being either true or false.

Statement 1: An increase in the cost of energy affects both aggregate supply and aggregate demand.
A. True
B. False
Statement 2: One of the factors that increase aggregate demand is the consumption of more imports.
A. True
B. False
Statement 3: If the value of people's stock portfolios increases or if peoples houses appreciate in value, then this very easily could lead to an increase in aggregated demand.
A. True
B. False

Answer 1

Statement 1: An increase in the cost of energy affects both aggregate supply and aggregate demand.

• A. True

An increase in energy costs reduces both aggregate supply and demand.

Statement 2: One of the factors that increase aggregate demand is the consumption of more imports.

• B. False

If net exports decrease (exports - imports), then the aggregate demand curve will shift to the left, which means it will decrease.

Statement 3: If the value of people's stock portfolios increases or if peoples houses appreciate in value, then this very easily could lead to an increase in aggregated demand.

• A. True

This would lead to an increase in the net worth of households, which generally leads to higher spending.