Question 1

Everything else remaining the same, an increase in foreign income

Accepted Answer

A) increases Canada's aggregate supply. 
B) increases Canada's aggregate demand. 
C) decreases Canada's aggregate demand. 
D) creates a movement downward along Canada's aggregate demand curve. 
E) decreases Canada's aggregate supply. 
A) increases Canada's aggregate supply. 
B) increases Canada's aggregate demand. 
C) decreases Canada's aggregate demand. 
D) creates a movement downward along Canada's aggregate demand curve. 
E) decreases Canada's aggregate supply.

Question 2

Which of the following statements about the monetarist view of the macroeconomy is incorrect?

Accepted Answer

A) The money wage rate is sticky. 
B) Taxes should be kept low to avoid disincentive effects that decrease potential GDP. 
C) All recessions result from inappropriate monetary policy. 
D) Left alone, the economy rarely operates at full employment. 
E) Provided that the quantity of money is kept on a steady growth path, no active stabilization is needed to offset changes in aggregate demand. 
A) The money wage rate is sticky. 
B) Taxes should be kept low to avoid disincentive effects that decrease potential GDP. 
C) All recessions result from inappropriate monetary policy. 
D) Left alone, the economy rarely operates at full employment. 
E) Provided that the quantity of money is kept on a steady growth path, no active stabilization is needed to offset changes in aggregate demand.

Question 3

An inflationary gap is the amount by which

Accepted Answer

A) potential GDP exceeds real GDP. 
B) demand must increase to achieve full employment at a given price level. 
C) supply must increase to achieve full employment at a given price level. 
D) the price level must adjust to achieve full employment. 
E) real GDP exceeds potential GDP. 
A) potential GDP exceeds real GDP. 
B) demand must increase to achieve full employment at a given price level. 
C) supply must increase to achieve full employment at a given price level. 
D) the price level must adjust to achieve full employment. 
E) real GDP exceeds potential GDP.

Question 4

If a change in wealth is induced by a change in the price level, then this would be shown as a

Accepted Answer

A) movement along the aggregate demand curve. 
B) shift of the aggregate demand curve due to the substitution effects. 
C) movement along the aggregate demand curve due to the substitution effects. 
D) movement along the aggregate supply curve. 
E) shift of the aggregate demand curve due to the wealth effect. 
A) movement along the aggregate demand curve. 
B) shift of the aggregate demand curve due to the substitution effects. 
C) movement along the aggregate demand curve due to the substitution effects. 
D) movement along the aggregate supply curve. 
E) shift of the aggregate demand curve due to the wealth effect.

Question 5

When an economy is operating on its long-run aggregate supply curve,

Accepted Answer

A) the actual inflation rate is greater than the anticipated inflation rate. 
B) the actual unemployment rate equals the natural unemployment rate. 
C) unemployment will fall to an unusually low rate that is not likely to last into the future. 
D) real GDP demanded exceeds real GDP supplied. 
E) inflation must be positive. 
A) the actual inflation rate is greater than the anticipated inflation rate. 
B) the actual unemployment rate equals the natural unemployment rate. 
C) unemployment will fall to an unusually low rate that is not likely to last into the future. 
D) real GDP demanded exceeds real GDP supplied. 
E) inflation must be positive.

Question 6

Which one of the following is a reason for the negative slope of the aggregate demand curve?

Accepted Answer

A) the real wage effect 
B) the substitution effect 
C) the expected inflation effect 
D) the nominal balance effect 
E) the income effect 
A) the real wage effect 
B) the substitution effect 
C) the expected inflation effect 
D) the nominal balance effect 
E) the income effect

Question 7

Use the figure below to answer the following questions.
   
Figure 26.3.1
-Refer to Figure 26.3.1. Short-run macroeconomic equilibrium real GDP in Econoworld is

Accepted Answer

A) $360 billion. 
B) $400 billion. 
C) $440 billion. 
D) $480 billion. 
E) $520 billion. 
A) $360 billion. 
B) $400 billion. 
C) $440 billion. 
D) $480 billion. 
E) $520 billion.

Question 8

Use the figure below to answer the following questions.
   
Figure 26.3.1
-Refer to Figure 26.3.1. As Econoworld automatically adjusts to long-run equilibrium, the

Accepted Answer

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

Question 9

If real GDP is less than potential GDP, then the economy is

Accepted Answer

A) not in short-run equilibrium. 
B) in a full-employment equilibrium. 
C) in an above full-employment equilibrium. 
D) in a below full-employment equilibrium. 
E) in long-run equilibrium. 
A) not in short-run equilibrium. 
B) in a full-employment equilibrium. 
C) in an above full-employment equilibrium. 
D) in a below full-employment equilibrium. 
E) in long-run equilibrium.

Question 10

A vertical long-run aggregate supply curve indicates that

Accepted Answer

A) an increase in the price level will not expand an economy's output in the long run. 
B) output rates greater than the long-run output rate are unattainable. 
C) an increase in the price level will permit the economy to achieve a higher level of output. 
D) an increase in the price level will increase technological change and economic growth. 
E) the long-run aggregate supply curve never shifts. 
A) an increase in the price level will not expand an economy's output in the long run. 
B) output rates greater than the long-run output rate are unattainable. 
C) an increase in the price level will permit the economy to achieve a higher level of output. 
D) an increase in the price level will increase technological change and economic growth. 
E) the long-run aggregate supply curve never shifts.

Question 11

Use the table below to answer the following questions.
Table 26.3.3
  
-Refer to Table 26.3.3. With no interference from the central bank or the government, the

Accepted Answer

A) short-run aggregate supply curve will shift rightward. 
B) short-run aggregate supply curve will shift leftward. 
C) long-run aggregate supply curve will shift rightward. 
D) long-run aggregate supply curve will shift leftward. 
E) Both A and C will occur. 
A) short-run aggregate supply curve will shift rightward. 
B) short-run aggregate supply curve will shift leftward. 
C) long-run aggregate supply curve will shift rightward. 
D) long-run aggregate supply curve will shift leftward. 
E) Both A and C will occur.

Question 12

The world goes into an expansion. This event

Accepted Answer

A) decreases Canada's aggregate demand and decreases Canada's short-run aggregate supply. 
B) increases Canada's short-run aggregate supply. 
C) decreases Canada's aggregate demand. 
D) increases Canada's aggregate demand. 
E) increases Canada's long-run aggregate supply. 
A) decreases Canada's aggregate demand and decreases Canada's short-run aggregate supply. 
B) increases Canada's short-run aggregate supply. 
C) decreases Canada's aggregate demand. 
D) increases Canada's aggregate demand. 
E) increases Canada's long-run aggregate supply.

Question 13

Use the table below to answer the following questions.
Table 26.3.1
  
-Refer to Table 26.3.1. Consider the economy represented in the table. The economy is in

Accepted Answer

A) a long-run equilibrium, and resource prices will not change. 
B) an above full-employment equilibrium, and factor prices will increase. 
C) an above full-employment equilibrium, and factor prices will decrease. 
D) a below full-employment equilibrium, and factor prices will decrease. 
E) a below full-employment equilibrium, and factor prices will increase. 
A) a long-run equilibrium, and resource prices will not change. 
B) an above full-employment equilibrium, and factor prices will increase. 
C) an above full-employment equilibrium, and factor prices will decrease. 
D) a below full-employment equilibrium, and factor prices will decrease. 
E) a below full-employment equilibrium, and factor prices will increase.

Question 14

An increase in oil prices to a country that is a net importer of oil shifts

Accepted Answer

A) both the short-run aggregate supply and long-run aggregate supply curves rightward. 
B) both the short-run aggregate supply and long-run aggregate supply curves leftward. 
C) the short-run aggregate supply curve leftward, but leaves the long-run aggregate supply curve unchanged. 
D) the long-run aggregate supply curve rightward, but leaves the short-run aggregate supply curve unchanged. 
E) the short-run aggregate supply curve leftward, but shifts the long-run aggregate supply curve rightward. 
A) both the short-run aggregate supply and long-run aggregate supply curves rightward. 
B) both the short-run aggregate supply and long-run aggregate supply curves leftward. 
C) the short-run aggregate supply curve leftward, but leaves the long-run aggregate supply curve unchanged. 
D) the long-run aggregate supply curve rightward, but leaves the short-run aggregate supply curve unchanged. 
E) the short-run aggregate supply curve leftward, but shifts the long-run aggregate supply curve rightward.

Question 15

Use the figure below to answer the following questions.
   
Figure 26.3.2
-Refer to Figure 26.3.2. Consider statements (1)and (2)and select the correct answer. (1) The economy of Mythlo is experiencing an above full-employment equilibrium.
(2) SAS will automatically shift rightward as the economy adjusts to long-run equilibrium.

Accepted Answer

A) (1)is true; (2)is false. 
B) (2)is true; (1)is false. 
C) (1)and (2)are false. 
D) (1)and (2)are true. 
E) (1)is true; (2)is true only if the LAS curve shifts rightward at the same time. 
A) (1)is true; (2)is false. 
B) (2)is true; (1)is false. 
C) (1)and (2)are false. 
D) (1)and (2)are true. 
E) (1)is true; (2)is true only if the LAS curve shifts rightward at the same time.

Question 16

Use the table below to answer the following questions.
Table 26.3.1
  
-Refer to Table 26.3.1. Consider the economy represented in the table. The economy eventually moves to its long-run equilibrium. In long-run equilibrium, the price level is ________ and real GDP is ________ billion.

Accepted Answer

A) 125; $550 
B) 120; $600 
C) 120; $500 
D) 130; $600 
E) 130; $500 
A) 125; $550 
B) 120; $600 
C) 120; $500 
D) 130; $600 
E) 130; $500

Question 17

The defining feature of the Keynesian view of macroeconomics is

Accepted Answer

A) that the economy is rarely at full employment. 
B) that the economy is self-regulating and always at full employment. 
C) that the quantity of money is the most significant influence on aggregate demand. 
D) that the economy is constantly bombarded by shocks that arise from the uneven pace of technological change. 
E) that no active stabilization is needed to offset changes in aggregate demand. 
A) that the economy is rarely at full employment. 
B) that the economy is self-regulating and always at full employment. 
C) that the quantity of money is the most significant influence on aggregate demand. 
D) that the economy is constantly bombarded by shocks that arise from the uneven pace of technological change. 
E) that no active stabilization is needed to offset changes in aggregate demand.

Question 18

Which one of the following variables is not held constant along a given aggregate demand curve?

Accepted Answer

A) fiscal policy 
B) monetary policy 
C) the exchange rate 
D) expectations about inflation 
E) the price level 
A) fiscal policy 
B) monetary policy 
C) the exchange rate 
D) expectations about inflation 
E) the price level

Question 19

If the price level rises, then the wealth effect leads to

Accepted Answer

A) an increase in real wealth, an increase in current consumption expenditure, and an increase in saving. 
B) an increase in real wealth, an increase in current consumption expenditure, and a decrease in saving. 
C) a decrease in real wealth, an increase in current consumption expenditure, and an increase in saving. 
D) a decrease in real wealth, an increase in current consumption expenditure, and a decrease in saving. 
E) a decrease in real wealth, a decrease in current consumption expenditure, and an increase in saving. 
A) an increase in real wealth, an increase in current consumption expenditure, and an increase in saving. 
B) an increase in real wealth, an increase in current consumption expenditure, and a decrease in saving. 
C) a decrease in real wealth, an increase in current consumption expenditure, and an increase in saving. 
D) a decrease in real wealth, an increase in current consumption expenditure, and a decrease in saving. 
E) a decrease in real wealth, a decrease in current consumption expenditure, and an increase in saving.

Question 20

The defining feature of the classical view of macroeconomics is that the economy is

Accepted Answer

A) rarely at full employment. 
B) driven by expectations called "animal spirits." 
C) self-regulating and always at full employment. 
D) constantly bombarded by shocks that arise from the uneven pace of technological change. 
E) the most significant influence on aggregate demand is expectations. 
A) rarely at full employment. 
B) driven by expectations called "animal spirits." 
C) self-regulating and always at full employment. 
D) constantly bombarded by shocks that arise from the uneven pace of technological change. 
E) the most significant influence on aggregate demand is expectations.

Exam 26: Aggregate Supply and Aggregate Demand

Everything else remaining the same, an increase in foreign income

Which of the following statements about the monetarist view of the macroeconomy is incorrect?

An inflationary gap is the amount by which

If a change in wealth is induced by a change in the price level, then this would be shown as a

When an economy is operating on its long-run aggregate supply curve,

Which one of the following is a reason for the negative slope of the aggregate demand curve?

Use the figure below to answer the following questions. Figure 26.3.1 -Refer to Figure 26.3.1. Short-run macroeconomic equilibrium real GDP in Econoworld is

Use the figure below to answer the following questions. Figure 26.3.1 -Refer to Figure 26.3.1. As Econoworld automatically adjusts to long-run equilibrium, the

If real GDP is less than potential GDP, then the economy is

A vertical long-run aggregate supply curve indicates that

Use the table below to answer the following questions. Table 26.3.3 -Refer to Table 26.3.3. With no interference from the central bank or the government, the

The world goes into an expansion. This event

Use the table below to answer the following questions. Table 26.3.1 -Refer to Table 26.3.1. Consider the economy represented in the table. The economy is in

An increase in oil prices to a country that is a net importer of oil shifts

Use the table below to answer the following questions. Table 26.3.1 -Refer to Table 26.3.1. Consider the economy represented in the table. The economy eventually moves to its long-run equilibrium. In long-run equilibrium, the price level is ________ and real GDP is ________ billion.

The defining feature of the Keynesian view of macroeconomics is

Which one of the following variables is not held constant along a given aggregate demand curve?

If the price level rises, then the wealth effect leads to

The defining feature of the classical view of macroeconomics is that the economy is

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 table below to answer the following questions. Table 26.3.1 -Refer to Table 26.3.1. Consider the economy represented in the table. The economy eventually moves to its long-run equilibrium. In long-run equilibrium, the price level is and real GDP is billion.