Question 1

Which of the following statements is the most accurate description of the open economy effect?

Accepted Answer

A) It is the ability to easily enter a marketplace if there is the potential for profit or exit from it if the business is not successful. 
B) People are allowed to trade with anyone, anywhere, anytime. 
C) If prices of the goods and services in the domestic market rise relative to those in global markets due to a higher domestic price level, consumers and businesses will buy more from foreign producers and less from domestic producers, other things being equal. 
D) If prices of the goods and services in the domestic market rise relative to those in global markets due to a higher domestic price level, consumers and businesses will buy less from foreign producers and more from domestic producers. 
A) It is the ability to easily enter a marketplace if there is the potential for profit or exit from it if the business is not successful. 
B) People are allowed to trade with anyone, anywhere, anytime. 
C) If prices of the goods and services in the domestic market rise relative to those in global markets due to a higher domestic price level, consumers and businesses will buy more from foreign producers and less from domestic producers, other things being equal. 
D) If prices of the goods and services in the domestic market rise relative to those in global markets due to a higher domestic price level, consumers and businesses will buy less from foreign producers and more from domestic producers.

Question 2

Figure 8-2
  
-Refer to Figure 8-2.Which of the following would a shift in aggregate demand from AD₀ to AD₂ illustrate?

Accepted Answer

A) an increase in investment, combined with an increase in imports 
B) the discovery of new, profitable, technological investment opportunities, combined with inventory levels that have fallen below desired levels 
C) a reduction in business expectations, combined with the imposition of new tariffs by major trading partners 
D) faster growth rates by a major trading partner, combined with an increase in stock market wealth 
A) an increase in investment, combined with an increase in imports 
B) the discovery of new, profitable, technological investment opportunities, combined with inventory levels that have fallen below desired levels 
C) a reduction in business expectations, combined with the imposition of new tariffs by major trading partners 
D) faster growth rates by a major trading partner, combined with an increase in stock market wealth

Question 3

What is an increase in interest rates likely to result in?

Accepted Answer

A) an increase in investment spending 
B) a decrease in investment spending 
C) an increase in consumption spending 
D) no change in either consumption or investment spending 
A) an increase in investment spending 
B) a decrease in investment spending 
C) an increase in consumption spending 
D) no change in either consumption or investment spending

Question 4

If Alice's taxes fell by $10 000,other things being equal,which of the following statements about her consumption is accurate?

Accepted Answer

A) It would rise by $6000 if her APC was equal to 0.6. 
B) It would fall by $6000 if her APC was equal to 0.6. 
C) It would rise by $6000 if her MPC was equal to 0.6. 
D) It would fall by $6000 if her MPC was equal to 0.6. 
A) It would rise by $6000 if her APC was equal to 0.6. 
B) It would fall by $6000 if her APC was equal to 0.6. 
C) It would rise by $6000 if her MPC was equal to 0.6. 
D) It would fall by $6000 if her MPC was equal to 0.6.

Question 5

Which of the following is likely to increase investment and,as a result,increase aggregate demand?

Accepted Answer

A) decreased business taxes 
B) higher interest rates 
C) pessimistic business forecasts 
D) an increase in inventory levels 
A) decreased business taxes 
B) higher interest rates 
C) pessimistic business forecasts 
D) an increase in inventory levels

Question 6

What impact will an increase in the Canadian price level have?

Accepted Answer

A) It will decrease money demand in Canada. 
B) It will increase real GDP demanded in Canada. 
C) It will increase Canadian exports. 
D) It will increase Canadian imports. 
A) It will decrease money demand in Canada. 
B) It will increase real GDP demanded in Canada. 
C) It will increase Canadian exports. 
D) It will increase Canadian imports.

Question 7

What occurs at lower real interest rates?

Accepted Answer

A) Governments consume less. 
B) People save less. 
C) People save more. 
D) Firms invest less. 
A) Governments consume less. 
B) People save less. 
C) People save more. 
D) Firms invest less.

Question 8

What effect will a reduction in personal income taxes,other things being equal,have?

Accepted Answer

A) It will decrease aggregate demand. 
B) It will leave consumers with more disposable income. 
C) It will leave consumers with less disposable income. 
D) It will increase aggregate supply. 
A) It will decrease aggregate demand. 
B) It will leave consumers with more disposable income. 
C) It will leave consumers with less disposable income. 
D) It will increase aggregate supply.

Question 9

Which of the following changes in tax income would lead to the smallest increase in consumption?

Accepted Answer

A) a $20 000 decrease in taxes, if MPC equals 0.5 
B) a $12 000 decrease in taxes, if MPC equals 0.75 
C) a $30 000 decrease in taxes, if MPC equals 0.25 
D) a $15 000 decrease in taxes, if MPC equals 0.6 
A) a $20 000 decrease in taxes, if MPC equals 0.5 
B) a $12 000 decrease in taxes, if MPC equals 0.75 
C) a $30 000 decrease in taxes, if MPC equals 0.25 
D) a $15 000 decrease in taxes, if MPC equals 0.6

Question 10

What will cause consumption and,as a result,aggregate demand to shift to the right?

Accepted Answer

A) an optimistic business forecast of future profits 
B) a tax increase 
C) an increase in consumer confidence 
D) decreased consumer wealth 
A) an optimistic business forecast of future profits 
B) a tax increase 
C) an increase in consumer confidence 
D) decreased consumer wealth

Question 11

What will cause consumption and,as a result,aggregate demand to decrease?

Accepted Answer

A) rising price levels 
B) a decrease in interest rates 
C) a fall in business confidence 
D) a tax increase 
A) rising price levels 
B) a decrease in interest rates 
C) a fall in business confidence 
D) a tax increase

Question 12

In an open economy,as the price level increases,what is the impact on the demand for domestic goods and the quantity of real GDP demanded?

Accepted Answer

A) The demand for domestic goods will increase, resulting in an increase in the quantity of real GDP demanded. 
B) The demand for domestic goods will increase, resulting in a decrease in the quantity of real GDP demanded. 
C) The demand for domestic goods will decrease, resulting in an increase in the quantity of real GDP demanded. 
D) The demand for domestic goods will decrease, resulting in a decrease in the quantity of real GDP demanded. 
A) The demand for domestic goods will increase, resulting in an increase in the quantity of real GDP demanded. 
B) The demand for domestic goods will increase, resulting in a decrease in the quantity of real GDP demanded. 
C) The demand for domestic goods will decrease, resulting in an increase in the quantity of real GDP demanded. 
D) The demand for domestic goods will decrease, resulting in a decrease in the quantity of real GDP demanded.

Question 13

What would be the impact on aggregate demand (AD)if exports and imports both fell,but exports fell more than imports?

Accepted Answer

A) AD would increase. 
B) AD could either increase or decrease. 
C) AD would be unaffected. 
D) AD would decrease. 
A) AD would increase. 
B) AD could either increase or decrease. 
C) AD would be unaffected. 
D) AD would decrease.

Question 14

What effect would the discovery of new,profitable,technological investment opportunities,combined with inventory levels that have risen far above desired levels,have on aggregate demand (AD)?

Accepted Answer

A) AD would increase. 
B) AD would decrease. 
C) AD could either increase or decrease, depending on which change was of a greater magnitude. 
D) AD would stay the same. 
A) AD would increase. 
B) AD would decrease. 
C) AD could either increase or decrease, depending on which change was of a greater magnitude. 
D) AD would stay the same.

Question 15

In a closed economy,what will an increase in government spending without an equivalent increase in tax revenue lead to?

Accepted Answer

A) a decrease in private saving and a decrease in investment 
B) a decrease public saving and a decrease in investment 
C) an increase in private saving and an increase in investment 
D) an increase in public saving and an increase in investment 
A) a decrease in private saving and a decrease in investment 
B) a decrease public saving and a decrease in investment 
C) an increase in private saving and an increase in investment 
D) an increase in public saving and an increase in investment

Question 16

Figure 8-2
  
-Refer to Figure 8-2.Which of the following would a shift in aggregate demand from AD₀ to AD₂ illustrate?

Accepted Answer

A) an increase in government purchases, combined with a decrease in investment 
B) faster growth rates by a major trading partner, combined with an increase in stock market wealth 
C) an increase in consumption, combined with an increase in exports 
D) an increase in business tax rates, combined with a decrease in consumer confidence 
A) an increase in government purchases, combined with a decrease in investment 
B) faster growth rates by a major trading partner, combined with an increase in stock market wealth 
C) an increase in consumption, combined with an increase in exports 
D) an increase in business tax rates, combined with a decrease in consumer confidence

Question 17

Which of the following will NOT decrease the investment demand curve?

Accepted Answer

A) business inventories that have risen far above desired levels 
B) business expectations of lower future sales and profits 
C) an increase in real interest rates 
D) higher business taxes 
A) business inventories that have risen far above desired levels 
B) business expectations of lower future sales and profits 
C) an increase in real interest rates 
D) higher business taxes

Question 18

How do economists define aggregate demand?

Accepted Answer

A) as the total spending by all consumers, business firms, governments, and foreigners in Canada 
B) as the total amount that all consumers, business firms, governments, and foreigners wish to spend on all final goods and services at various price levels 
C) as the total spending by consumers, business firms, and governments in one year 
D) as the total spending by consumers, business firms, and governments on final goods and services 
A) as the total spending by all consumers, business firms, governments, and foreigners in Canada 
B) as the total amount that all consumers, business firms, governments, and foreigners wish to spend on all final goods and services at various price levels 
C) as the total spending by consumers, business firms, and governments in one year 
D) as the total spending by consumers, business firms, and governments on final goods and services

Question 19

A trade deficit means that net exports are positive.

Accepted Answer

A) True 
 B)False

Question 20

How do economists define the average propensity to consume (APC)?

Accepted Answer

A) as the proportion of any change in disposable income that becomes a change in consumption 
B) as the proportion of any change in disposable income that does not become a change in consumption 
C) as the fraction of total disposable income that households do not spend on consumption 
D) as the fraction of total disposable income that households spend on consumption 
A) as the proportion of any change in disposable income that becomes a change in consumption 
B) as the proportion of any change in disposable income that does not become a change in consumption 
C) as the fraction of total disposable income that households do not spend on consumption 
D) as the fraction of total disposable income that households spend on consumption

Which of the following statements is the most accurate description of the open economy effect?

Figure 8-2 -Refer to Figure 8-2.Which of the following would a shift in aggregate demand from AD₀ to AD₂ illustrate?

What is an increase in interest rates likely to result in?

If Alice's taxes fell by $10 000,other things being equal,which of the following statements about her consumption is accurate?

Which of the following is likely to increase investment and,as a result,increase aggregate demand?

What impact will an increase in the Canadian price level have?

What occurs at lower real interest rates?

What effect will a reduction in personal income taxes,other things being equal,have?

Which of the following changes in tax income would lead to the smallest increase in consumption?

What will cause consumption and,as a result,aggregate demand to shift to the right?

What will cause consumption and,as a result,aggregate demand to decrease?

In an open economy,as the price level increases,what is the impact on the demand for domestic goods and the quantity of real GDP demanded?

What would be the impact on aggregate demand (AD)if exports and imports both fell,but exports fell more than imports?

What effect would the discovery of new,profitable,technological investment opportunities,combined with inventory levels that have risen far above desired levels,have on aggregate demand (AD)?

In a closed economy,what will an increase in government spending without an equivalent increase in tax revenue lead to?

Figure 8-2 -Refer to Figure 8-2.Which of the following would a shift in aggregate demand from AD₀ to AD₂ illustrate?

Which of the following will NOT decrease the investment demand curve?

How do economists define aggregate demand?

A trade deficit means that net exports are positive.

How do economists define the average propensity to consume (APC)?

The Role and Method of Economics

Scarcity, trade-Offs, and Production Possibilities

Supply and Demand

Bringing Supply and Demand Together

Introduction to the Macroeconomy

Measuring Economic Performance

Economic Growth in the Global Economy

Aggregate Supply and Macroeconomic Equilibrium

Fiscal Policy

Money and the Banking System

The Bank of Canada

Monetary Policy

International Trade

International Finance

Filters

Exam 8: Aggregate Demand

Which of the following statements is the most accurate description of the open economy effect?

Figure 8-2 -Refer to Figure 8-2.Which of the following would a shift in aggregate demand from AD₀ to AD₂ illustrate?

What is an increase in interest rates likely to result in?

If Alice's taxes fell by $10 000,other things being equal,which of the following statements about her consumption is accurate?

Which of the following is likely to increase investment and,as a result,increase aggregate demand?

What impact will an increase in the Canadian price level have?

What occurs at lower real interest rates?

What effect will a reduction in personal income taxes,other things being equal,have?

Which of the following changes in tax income would lead to the smallest increase in consumption?

What will cause consumption and,as a result,aggregate demand to shift to the right?

What will cause consumption and,as a result,aggregate demand to decrease?

In an open economy,as the price level increases,what is the impact on the demand for domestic goods and the quantity of real GDP demanded?

What would be the impact on aggregate demand (AD)if exports and imports both fell,but exports fell more than imports?

What effect would the discovery of new,profitable,technological investment opportunities,combined with inventory levels that have risen far above desired levels,have on aggregate demand (AD)?

In a closed economy,what will an increase in government spending without an equivalent increase in tax revenue lead to?

Figure 8-2 -Refer to Figure 8-2.Which of the following would a shift in aggregate demand from AD₀ to AD₂ illustrate?

Which of the following will NOT decrease the investment demand curve?

How do economists define aggregate demand?

A trade deficit means that net exports are positive.

How do economists define the average propensity to consume (APC)?

The Role and Method of Economics

Scarcity, trade-Offs, and Production Possibilities

Supply and Demand

Bringing Supply and Demand Together

Introduction to the Macroeconomy

Measuring Economic Performance

Economic Growth in the Global Economy

Aggregate Supply and Macroeconomic Equilibrium

Fiscal Policy

Money and the Banking System

The Bank of Canada

Monetary Policy

International Trade

International Finance

Filters