Question 1

Use the figure below to answer the following questions.
   
Figure 26.3.5
-Refer to Figure 26.3.5. Potential GDP is

Accepted Answer

A) $13 trillion. 
B) $13.5 trillion. 
C) more than $13 trillion and less than $13.5 trillion. 
D) less than $13 trillion. 
E) 100 
A) $13 trillion. 
B) $13.5 trillion. 
C) more than $13 trillion and less than $13.5 trillion. 
D) less than $13 trillion. 
E) 100

Question 2

Everything else remaining the same, which one of the following increases aggregate demand?

Accepted Answer

A) an increase in taxes 
B) an increase in transfer payments 
C) a decrease in government spending 
D) a decrease in the price level 
E) a decrease in the quantity of money 
A) an increase in taxes 
B) an increase in transfer payments 
C) a decrease in government spending 
D) a decrease in the price level 
E) a decrease in the quantity of money

Question 3

Potential GDP is the level of real GDP at which

Accepted Answer

A) aggregate demand equals short-run aggregate supply. 
B) there is full employment. 
C) there is a recessionary gap. 
D) there is over-full employment. 
E) prices are sure to rise. 
A) aggregate demand equals short-run aggregate supply. 
B) there is full employment. 
C) there is a recessionary gap. 
D) there is over-full employment. 
E) prices are sure to rise.

Question 4

The short-run aggregate supply curve is the relationship between the quantity of real GDP supplied and

Accepted Answer

A) the quantity of real GDP demanded. 
B) real income. 
C) the inflation rate. 
D) the real interest rate. 
E) the price level. 
A) the quantity of real GDP demanded. 
B) real income. 
C) the inflation rate. 
D) the real interest rate. 
E) the price level.

Question 5

Use the figure below to answer the following questions.
   
Figure 26.3.1
-Refer to Figure 26.3.1. When the economy of Econoworld is in short-run macroeconomic equilibrium, the price level is

Accepted Answer

A) 100. 
B) 90. 
C) 75. 
D) 70. 
E) 85. 
A) 100. 
B) 90. 
C) 75. 
D) 70. 
E) 85.

Question 6

Which of the following news quotes best describes a Keynesian 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 7

Use the figure below to answer the following questions.
   
Figure 26.3.1
-Refer to Figure 26.3.1. Consider statements (1)and (2)and select the correct answer. (1) The economy of Econoworld 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 if unemployment is below the natural rate. 
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 if unemployment is below the natural rate.

Question 8

Short-run macroeconomic equilibrium always occurs when the

Accepted Answer

A) economy is at full employment. 
B) economy is below full employment. 
C) economy is above full employment. 
D) quantity of real GDP demanded equals the quantity of real GDP supplied. 
E) AD curve intersects the LAS curve. 
A) economy is at full employment. 
B) economy is below full employment. 
C) economy is above full employment. 
D) quantity of real GDP demanded equals the quantity of real GDP supplied. 
E) AD curve intersects the LAS curve.

Question 9

The economy cannot remain indefinitely with real GDP greater than potential GDP because the money wage rate will

Accepted Answer

A) decrease, shifting the LAS curve rightward. 
B) decrease, shifting the SAS curve rightward. 
C) increase, shifting the LAS curve leftward. 
D) increase, shifting the SAS curve leftward. 
E) increase, shifting the SAS curve rightward. 
A) decrease, shifting the LAS curve rightward. 
B) decrease, shifting the SAS curve rightward. 
C) increase, shifting the LAS curve leftward. 
D) increase, shifting the SAS curve leftward. 
E) increase, shifting the SAS curve rightward.

Question 10

Use the figure below to answer the following questions.
   
Figure 26.3.3
-Refer to Figure 26.3.3. Which of the graphs illustrates an above full-employment equilibrium?

Accepted Answer

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

Question 11

Use the figure below to answer the following questions.
   
Figure 26.1.1
-Refer to Figure 26.1.1. Which graph illustrates what happens when factor prices rise?

Accepted Answer

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

Question 12

Aggregate demand is the relationship between

Accepted Answer

A) real aggregate expenditure and real GDP. 
B) real income and real GDP. 
C) real prices and real GDP. 
D) the price level and the quantity of real GDP demanded. 
E) the price level and nominal GDP. 
A) real aggregate expenditure and real GDP. 
B) real income and real GDP. 
C) real prices and real GDP. 
D) the price level and the quantity of real GDP demanded. 
E) the price level and nominal GDP.

Question 13

Which of the following will lower the price level for sure?

Accepted Answer

A) The AD curve shifts rightward and the SAS curve shifts leftward. 
B) The AD curve shifts rightward and the SAS curve remains unchanged. 
C) The SAS curve shifts leftward. 
D) The LAS curve shifts leftward. 
E) The AD curve shifts leftward and the SAS curve shifts rightward. 
A) The AD curve shifts rightward and the SAS curve shifts leftward. 
B) The AD curve shifts rightward and the SAS curve remains unchanged. 
C) The SAS curve shifts leftward. 
D) The LAS curve shifts leftward. 
E) The AD curve shifts leftward and the SAS curve shifts rightward.

Question 14

A ________ macroeconomist believes that business cycle fluctuations are the efficient responses of a well-functioning market economy that is bombarded by shocks that arise from the uneven pace of technological change. A ________ macroeconomist believes that the short-run aggregate supply curve is horizontal at a fixed price level.

Accepted Answer

A) new classical; monetarist 
B) classical; monetarist 
C) Keynesian; new Keynesian 
D) new classical; new Keynesian 
E) monetarist; new classical 
A) new classical; monetarist 
B) classical; monetarist 
C) Keynesian; new Keynesian 
D) new classical; new Keynesian 
E) monetarist; new classical

Question 15

Canada's exports to the European Union boom. What is the effect on the quantity of real GDP demanded or aggregate demand in Canada?

Accepted Answer

A) The quantity of Canadian real GDP demanded increases. 
B) The quantity of Canadian real GDP demanded decreases. 
C) Canadian aggregate demand increases. 
D) Canadian aggregate demand decreases. 
E) There is no change to either the quantity of real GDP demanded or to aggregate demand. 
A) The quantity of Canadian real GDP demanded increases. 
B) The quantity of Canadian real GDP demanded decreases. 
C) Canadian aggregate demand increases. 
D) Canadian aggregate demand decreases. 
E) There is no change to either the quantity of real GDP demanded or to aggregate demand.

Question 16

Keynesian macroeconomists recommend

Accepted Answer

A) an increase in the quantity of money to offset decreases in aggregate demand and a decrease in the quantity of money to offset increases in aggregate demand. 
B) policies that actively offset changes in long-run aggregate supply that result in negative economic growth. 
C) policies that minimize the disincentive effects of taxes on employment, investment, and technological change. 
D) policies that actively offset changes in aggregate demand that bring recession. 
E) none of the above 
A) an increase in the quantity of money to offset decreases in aggregate demand and a decrease in the quantity of money to offset increases in aggregate demand. 
B) policies that actively offset changes in long-run aggregate supply that result in negative economic growth. 
C) policies that minimize the disincentive effects of taxes on employment, investment, and technological change. 
D) policies that actively offset changes in aggregate demand that bring recession. 
E) none of the above

Question 17

Everything else remaining the same, the short-run aggregate supply curve shifts rightward if

Accepted Answer

A) the money wage rate increases. 
B) aggregate demand increases. 
C) the full-employment quantity of labour increases. 
D) factor prices increase. 
E) the quantity of capital decreases. 
A) the money wage rate increases. 
B) aggregate demand increases. 
C) the full-employment quantity of labour increases. 
D) factor prices increase. 
E) the quantity of capital decreases.

Question 18

Use the figure below to answer the following questions.
   
Figure 26.3.1
-Refer to Figure 26.3.1. Consider statements (1)and (2)and select the correct answer. (1) The actual unemployment rate exceeds the natural unemployment rate.
(2) Short-run aggregate supply will automatically shift leftward 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 if the money wage rate falls. 
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 if the money wage rate falls.

Question 19

Your total wealth is $1,000, which you are holding in your savings account. If the price level rises by 10 percent, your wealth

Accepted Answer

A) increases by an unknown amount. 
B) is unchanged. 
C) decreases to $990. 
D) is worth 10 percent less than before the price level change. 
E) increases to $1,100. 
A) increases by an unknown amount. 
B) is unchanged. 
C) decreases to $990. 
D) is worth 10 percent less than before the price level change. 
E) increases to $1,100.

Question 20

The Canadian price level rises. This event

Accepted Answer

A) increases short-run aggregate supply. 
B) increases the quantity of real GDP supplied. 
C) decreases the quantity of real GDP supplied. 
D) increases long-run aggregate supply. 
E) decreases short-run aggregate supply. 
A) increases short-run aggregate supply. 
B) increases the quantity of real GDP supplied. 
C) decreases the quantity of real GDP supplied. 
D) increases long-run aggregate supply. 
E) decreases short-run aggregate supply.

Exam 26: Aggregate Supply and Aggregate Demand

Use the figure below to answer the following questions. Figure 26.3.5 -Refer to Figure 26.3.5. Potential GDP is

Everything else remaining the same, which one of the following increases aggregate demand?

Potential GDP is the level of real GDP at which

The short-run aggregate supply curve is the relationship between the quantity of real GDP supplied and

Use the figure below to answer the following questions. Figure 26.3.1 -Refer to Figure 26.3.1. When the economy of Econoworld is in short-run macroeconomic equilibrium, the price level is

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

Short-run macroeconomic equilibrium always occurs when the

The economy cannot remain indefinitely with real GDP greater than potential GDP because the money wage rate will

Use the figure below to answer the following questions. Figure 26.3.3 -Refer to Figure 26.3.3. Which of the graphs illustrates an above full-employment equilibrium?

Use the figure below to answer the following questions. Figure 26.1.1 -Refer to Figure 26.1.1. Which graph illustrates what happens when factor prices rise?

Aggregate demand is the relationship between

Which of the following will lower the price level for sure?

Canada's exports to the European Union boom. What is the effect on the quantity of real GDP demanded or aggregate demand in Canada?

Keynesian macroeconomists recommend

Everything else remaining the same, the short-run aggregate supply curve shifts rightward if

Your total wealth is $1,000, which you are holding in your savings account. If the price level rises by 10 percent, your wealth

The Canadian price level rises. This event

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