A rise in the price level will:
a. cause an upward movement along the aggregate demand curve.
b. cause a downward movement along the aggregate demand curve.
c. cause a leftward shift of the aggregate demand curve

Grace Makutsi finally bought a pair of blue shoes that she had been coveting for a long time. In less than a week she discovered that the shoes were uncomfortable. Grace went back to wearing her old pair and stashed away the new pair

When asked by her boss, Mme. Ramotswe, why does she not simply give away the new pair, she said: "But I paid so much for them." Grace's behavior A) supports the endowment effect which states that ownership of an item makes it more valuable. B) is rational because the more you pay for an item the more valuable it is. C) ignores the fact that the purchase price is now a sunk cost and has no bearing on whether she should give them away or not. D) is rational: she should not discard a valuable item.

Government spending and taxes

A) do not change aggregate demand. B) are an important component of aggregate supply. C) do not play a big role in determining GDP. D) are a major determinant of aggregate demand.