Question 1

Use the figure below to answer the following question.
   
Figure 26.3.4
-Refer to Figure 26.3.4. The changes represented

Accepted Answer

A) cannot occur because aggregate demand and short-run aggregate supply cannot change at the same time. 
B) lead to an inflationary gap. 
C) lead to a recessionary gap. 
D) cause a proportionate increase in long run aggregate supply. 
E) increase real GDP. 
A) cannot occur because aggregate demand and short-run aggregate supply cannot change at the same time. 
B) lead to an inflationary gap. 
C) lead to a recessionary gap. 
D) cause a proportionate increase in long run aggregate supply. 
E) increase real GDP. E

Question 2

Full-employment equilibrium occurs when

Accepted Answer

A) aggregate demand equals short-run aggregate supply. 
B) all who are willing and able to work, are working. 
C) real GDP equals potential GDP. 
D) real GDP equals potential GDP and the wage level is set so that the GDP deflator equals 100. 
E) all who are willing and able to work are working, and the wage level is set so that the GDP deflator equals 100. 
A) aggregate demand equals short-run aggregate supply. 
B) all who are willing and able to work, are working. 
C) real GDP equals potential GDP. 
D) real GDP equals potential GDP and the wage level is set so that the GDP deflator equals 100. 
E) all who are willing and able to work are working, and the wage level is set so that the GDP deflator equals 100. C

Question 3

Use the table below to answer the following questions.
Table 26.3.1
  
-Refer to Table 26.3.1. As this economy moves to long-run equilibrium, the

Accepted Answer

A) SAS curve shifts leftward. 
B) SAS curve shifts rightward. 
C) AD curve shifts rightward. 
D) AD curve shifts leftward. 
E) LAS curve shifts leftward. 
A) SAS curve shifts leftward. 
B) SAS curve shifts rightward. 
C) AD curve shifts rightward. 
D) AD curve shifts leftward. 
E) LAS curve shifts leftward. B

Question 4

The Canadian government increases its expenditure on goods and services in a time of war or increased international tension. Starting from a position of long-run equilibrium, what effect does this event have on Canada's economy in the short run?

Accepted Answer

A) Real GDP increases and the price level rises. 
B) Real GDP decreases and the price level falls. 
C) Real GDP increases and the price level falls. 
D) Real GDP decreases and the price level rises. 
E) There is no change in either real GDP or the price level. 
A) Real GDP increases and the price level rises. 
B) Real GDP decreases and the price level falls. 
C) Real GDP increases and the price level falls. 
D) Real GDP decreases and the price level rises. 
E) There is no change in either real GDP or the price level.

Question 5

Use the figure below to answer the following questions.
   
Figure 26.2.1
-Refer to Figure 26.2.1. Which graph illustrates what happens when government expenditure increases?

Accepted Answer

A) (a)only 
B) (b)only 
C) (c)only 
D) (d)only 
E) Both (a)and (c) 
A) (a)only 
B) (b)only 
C) (c)only 
D) (d)only 
E) Both (a)and (c)

Question 6

Economic growth results when there are increases in

Accepted Answer

A) aggregate demand. 
B) the real wage rate. 
C) long-run aggregate supply. 
D) the inflationary gap. 
E) short-run aggregate supply resulting from falling money wage rates and falling factor prices. 
A) aggregate demand. 
B) the real wage rate. 
C) long-run aggregate supply. 
D) the inflationary gap. 
E) short-run aggregate supply resulting from falling money wage rates and falling factor prices.

Question 7

The short-run aggregate supply curve indicates

Accepted Answer

A) the relationship between the price level and real GDP demanded by consumers, investors, governments, and net exporters. 
B) the relationship between the price level and the natural unemployment rate. 
C) the relationship between the purchasing power of wages and the quantity of labour supplied by households. 
D) the relationship between the quantity of real GDP supplied and the price level when the money wage rate, the prices of other resources, and potential GDP remain constant. 
E) the various quantities of real GDP producers supply at different income levels. 
A) the relationship between the price level and real GDP demanded by consumers, investors, governments, and net exporters. 
B) the relationship between the price level and the natural unemployment rate. 
C) the relationship between the purchasing power of wages and the quantity of labour supplied by households. 
D) the relationship between the quantity of real GDP supplied and the price level when the money wage rate, the prices of other resources, and potential GDP remain constant. 
E) the various quantities of real GDP producers supply at different income levels.

Question 8

Canadian businesses expect future profits to rise. Starting from a position of long-run equilibrium, what effect does this event have on Canada's economy in the short run?

Accepted Answer

A) Real GDP increases and the price level rises. 
B) Real GDP decreases and the price level falls. 
C) Real GDP increases and the price level falls. 
D) Real GDP decreases and the price level rises. 
E) There is no change in either real GDP or the price level. 
A) Real GDP increases and the price level rises. 
B) Real GDP decreases and the price level falls. 
C) Real GDP increases and the price level falls. 
D) Real GDP decreases and the price level rises. 
E) There is no change in either real GDP or the price level.

Question 9

Use the figure below to answer the following questions.
   
Figure 26.3.2
-Refer to Figure 26.3.2. When the economy of Mythlo is in short-run macroeconomic equilibrium, the price level is

Accepted Answer

A) 65. 
B) 95. 
C) 70. 
D) 75. 
E) 80. 
A) 65. 
B) 95. 
C) 70. 
D) 75. 
E) 80.

Question 10

Beginning at a long-run equilibrium, an increase in aggregate demand

Accepted Answer

A) increases the price level and in the long run increases real GDP. 
B) increases the price level and in the long run decreases real GDP. 
C) decreases the price level and in the long run increases real GDP. 
D) decreases the price level and in the long run decreases real GDP. 
E) increases the price level, but in the long run there is no change in real GDP. 
A) increases the price level and in the long run increases real GDP. 
B) increases the price level and in the long run decreases real GDP. 
C) decreases the price level and in the long run increases real GDP. 
D) decreases the price level and in the long run decreases real GDP. 
E) increases the price level, but in the long run there is no change in real GDP.

Question 11

Use the figure below to answer the following questions.
   
Figure 26.2.1
-Refer to Figure 26.2.1. Which graph illustrates what happens when the quantity of money decreases?

Accepted Answer

A) (a)only 
B) (b)only 
C) (c)only 
D) (d)only 
E) Both (b)and (d) 
A) (a)only 
B) (b)only 
C) (c)only 
D) (d)only 
E) Both (b)and (d)

Question 12

Use the figure below to answer the following questions.
   
Figure 26.3.1
-Refer to Figure 26.3.1. Econoworld is at its short-run macroeconomic equilibrium. There is a difference between ________ real GDP and potential GDP of $________ billion.

Accepted Answer

A) above full-employment equilibrium; 40 
B) above full-employment equilibrium; 20 
C) below full-employment equilibrium; 40 
D) below full-employment equilibrium; 20 
E) full-employment equilibrium; 0 
A) above full-employment equilibrium; 40 
B) above full-employment equilibrium; 20 
C) below full-employment equilibrium; 40 
D) below full-employment equilibrium; 20 
E) full-employment equilibrium; 0

Question 13

Use the figure below to answer the following questions.
   
Figure 26.3.1
-Refer to Figure 26.3.1. If Econoworld automatically adjusts to a long-run equilibrium, then in the long-run macroeconomic equilibrium,

Accepted Answer

A) the price level is 70. 
B) real GDP is $440 billion. 
C) actual unemployment exceeds the natural unemployment rate. 
D) potential GDP is greater than in the short run. 
E) Both A and B 
A) the price level is 70. 
B) real GDP is $440 billion. 
C) actual unemployment exceeds the natural unemployment rate. 
D) potential GDP is greater than in the short run. 
E) Both A and B

Question 14

Which one of the following shifts the aggregate demand curve leftward?

Accepted Answer

A) a decrease in the interest rate 
B) an increase in expected inflation 
C) an increase in taxes 
D) an increase in the price level 
E) an increase in the money wage rate 
A) a decrease in the interest rate 
B) an increase in expected inflation 
C) an increase in taxes 
D) an increase in the price level 
E) an increase in the money wage rate

Question 15

Aggregate demand

Accepted Answer

A) measures the amount of a nation's goods and services that people are willing to buy. 
B) measures the amount of a nation's labour, capital, and technology that people are willing to buy. 
C) is the relationship between the quantity of real GDP demanded and the price level. 
D) increases when the price level falls. 
E) increases when factor prices fall. 
A) measures the amount of a nation's goods and services that people are willing to buy. 
B) measures the amount of a nation's labour, capital, and technology that people are willing to buy. 
C) is the relationship between the quantity of real GDP demanded and the price level. 
D) increases when the price level falls. 
E) increases when factor prices fall.

Question 16

Which one of the following newspaper quotations describes a movement along an SAS curve?

Accepted Answer

A) "The decrease in consumer spending may lead to a recession." 
B) "The increase in consumer spending is expected to lead to inflation, without any increase in real GDP." 
C) "Recent higher wage settlements are expected to cause higher inflation this year." 
D) "Growth has been unusually high the last few years due to more women entering the labour force." 
E) "The recent tornadoes destroyed many factories in Calgary and Edmonton." 
A) "The decrease in consumer spending may lead to a recession." 
B) "The increase in consumer spending is expected to lead to inflation, without any increase in real GDP." 
C) "Recent higher wage settlements are expected to cause higher inflation this year." 
D) "Growth has been unusually high the last few years due to more women entering the labour force." 
E) "The recent tornadoes destroyed many factories in Calgary and Edmonton."

Question 17

Which of the following news quotes best describes a new classical view of a recession?

Accepted Answer

A) "Rapid computerization is creating obsolete workers and higher unemployment." 
B) "The unexpectedly tight fiscal policy is raising spending and lowering unemployment." 
C) "The anti-inflationary policy of the Bank of Canada is increasing spending." 
D) "The cuts in government spending have helped lower consumer spending and created unemployment." 
E) "Businesses are very worried about future sales and have lowered their purchases of capital equipment." 
A) "Rapid computerization is creating obsolete workers and higher unemployment." 
B) "The unexpectedly tight fiscal policy is raising spending and lowering unemployment." 
C) "The anti-inflationary policy of the Bank of Canada is increasing spending." 
D) "The cuts in government spending have helped lower consumer spending and created unemployment." 
E) "Businesses are very worried about future sales and have lowered their purchases of capital equipment."

Question 18

Which one of the following factors will not shift the aggregate demand curve?

Accepted Answer

A) an increase in the interest rate 
B) an increase in the expected inflation rate 
C) an increase in the price level 
D) an increase in expected future profits 
E) an increase in the quantity of money 
A) an increase in the interest rate 
B) an increase in the expected inflation rate 
C) an increase in the price level 
D) an increase in expected future profits 
E) an increase in the quantity of money

Question 19

Use the figure below to answer the following questions.
   
Figure 26.3.2
-Refer to Figure 26.3.2. In Mythlo there is a difference between the ________ equilibrium real GDP and potential GDP of ________ billion.

Accepted Answer

A) above full-employment; $50 
B) above full-employment; $25 
C) below full-employment; $50 
D) below full-employment; $25 
E) full employment; 0 
A) above full-employment; $50 
B) above full-employment; $25 
C) below full-employment; $50 
D) below full-employment; $25 
E) full employment; 0

Question 20

We observe a decrease in the price level and a decrease in real GDP. Which of the following is a possible explanation?

Accepted Answer

A) a decrease in the quantity of money 
B) an increase in expected future income 
C) an increase in factor prices 
D) an increase in the quantity of capital 
E) an increase in expected future profits 
A) a decrease in the quantity of money 
B) an increase in expected future income 
C) an increase in factor prices 
D) an increase in the quantity of capital 
E) an increase in expected future profits

Exam 26: Aggregate Supply and Aggregate Demand

Use the figure below to answer the following question. Figure 26.3.4 -Refer to Figure 26.3.4. The changes represented

Full-employment equilibrium occurs when

Use the table below to answer the following questions. Table 26.3.1 -Refer to Table 26.3.1. As this economy moves to long-run equilibrium, the

The Canadian government increases its expenditure on goods and services in a time of war or increased international tension. Starting from a position of long-run equilibrium, what effect does this event have on Canada's economy in the short run?

Use the figure below to answer the following questions. Figure 26.2.1 -Refer to Figure 26.2.1. Which graph illustrates what happens when government expenditure increases?

Economic growth results when there are increases in

The short-run aggregate supply curve indicates

Canadian businesses expect future profits to rise. Starting from a position of long-run equilibrium, what effect does this event have on Canada's economy in the short run?

Use the figure below to answer the following questions. Figure 26.3.2 -Refer to Figure 26.3.2. When the economy of Mythlo is in short-run macroeconomic equilibrium, the price level is

Beginning at a long-run equilibrium, an increase in aggregate demand

Use the figure below to answer the following questions. Figure 26.2.1 -Refer to Figure 26.2.1. Which graph illustrates what happens when the quantity of money decreases?

Use the figure below to answer the following questions. Figure 26.3.1 -Refer to Figure 26.3.1. Econoworld is at its short-run macroeconomic equilibrium. There is a difference between ________ real GDP and potential GDP of $________ billion.

Use the figure below to answer the following questions. Figure 26.3.1 -Refer to Figure 26.3.1. If Econoworld automatically adjusts to a long-run equilibrium, then in the long-run macroeconomic equilibrium,

Which one of the following shifts the aggregate demand curve leftward?

Aggregate demand

Which one of the following newspaper quotations describes a movement along an SAS curve?

Which of the following news quotes best describes a new classical view of a recession?

Which one of the following factors will not shift the aggregate demand curve?

Use the figure below to answer the following questions. Figure 26.3.2 -Refer to Figure 26.3.2. In Mythlo there is a difference between the ________ equilibrium real GDP and potential GDP of ________ billion.

We observe a decrease in the price level and a decrease in real GDP. Which of the following is a possible explanation?

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Governments Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Externalities

Public Goods and Common Resources

Markets for Factors of Production

Economic Inequality

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Expenditure Multipliers

The Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

Macro Only: International Trade Policy

Filters

Use the figure below to answer the following questions. Figure 26.3.1 -Refer to Figure 26.3.1. Econoworld is at its short-run macroeconomic equilibrium. There is a difference between real GDP and potential GDP of $ billion.

Use the figure below to answer the following questions. Figure 26.3.2 -Refer to Figure 26.3.2. In Mythlo there is a difference between the equilibrium real GDP and potential GDP of billion.