Question 1

What is meant by the term human capital?

Accepted Answer

A) The sum of all assets owned by people. 
B) The accumulated skills and knowledge of human beings. 
C) The average age of those engaged in formal education. 
D) The amount of physical capital that each worker has to work with. 
A) The sum of all assets owned by people. 
B) The accumulated skills and knowledge of human beings. 
C) The average age of those engaged in formal education. 
D) The amount of physical capital that each worker has to work with.

Question 2

Explain the modern view of the aggregate supply curve.

Accepted Answer

The modern view of the aggregate supply

Question 3

All of the following,except,one are correct statements about labour productivity.Which is the exception?

Accepted Answer

A) It depends on physical capital. 
B) It depends on human capital. 
C) It is an integral part of what is considered labour quality. 
D) It is the basis for measuring economic growth. 
E) It reflects the amount of resources devoted to research and development. 
A) It depends on physical capital. 
B) It depends on human capital. 
C) It is an integral part of what is considered labour quality. 
D) It is the basis for measuring economic growth. 
E) It reflects the amount of resources devoted to research and development.

Question 4

What is the shape of the AS curve according to Keynesians?

Accepted Answer

A) Vertical,because prices tend to be inflexible. 
B) Vertical,at the level of LAS. 
C) Horizontal,because wages are inflexible. 
D) Downward-sloping,because wages are inflexible. 
A) Vertical,because prices tend to be inflexible. 
B) Vertical,at the level of LAS. 
C) Horizontal,because wages are inflexible. 
D) Downward-sloping,because wages are inflexible.

Question 5

According to Keynes,the aggregate supply curve is vertical.

Accepted Answer

A) True 
 B)False

Question 6

All of the following,except one,will shift the aggregate the demand to the right.Which is the exception?

Accepted Answer

A) Increase in wealth. 
B) Increase in the rate of interest. 
C) Increase in income levels abroad. 
D) Increase in business expectations. 
E) Decrease government regulations. 
A) Increase in wealth. 
B) Increase in the rate of interest. 
C) Increase in income levels abroad. 
D) Increase in business expectations. 
E) Decrease government regulations.

Question 7

At low levels of Real GDP,what is the result of a decrease in aggregate demand?

Accepted Answer

A) The price level will fall a lot and Real GDP will fall a little. 
B) The price level will fall a little and Real GDP will fall a lot. 
C) The price level will fall a little and Real GDP will rise a lot. 
D) The price level will fall a little and Real GDP will rise a little. 
E) Both the price level and Real GDP will fall about the same amount. 
A) The price level will fall a lot and Real GDP will fall a little. 
B) The price level will fall a little and Real GDP will fall a lot. 
C) The price level will fall a little and Real GDP will rise a lot. 
D) The price level will fall a little and Real GDP will rise a little. 
E) Both the price level and Real GDP will fall about the same amount.

Question 8

Assume that the Potential GDP in the economy of Peruggia is $750 and that the aggregate demand and aggregate supply are as shown below:
   a)What is the value of equilibrium GDP and the price level? What type of macroeconomic equilibrium exists?
b)Suppose that a serious firestorm hits parts of the country reducing its aggregate supply by $130.What will be the new values of equilibrium GDP and the price level?
c)What type of gap now exists and what is its size.

Accepted Answer

a)Price level: 110;GDP: $750;f

Question 9

According to neoclassical economists,what is true of the aggregate supply curve?

Accepted Answer

A) It is vertical because prices tend to be inflexible. 
B) It is horizontal because prices tend to be fixed. 
C) It is vertical at the capacity level of output in the economy. 
D) It is upward-sloping since higher outputs will only be produced at higher price levels. 
E) It is horizontal because supply creates its own demand. 
A) It is vertical because prices tend to be inflexible. 
B) It is horizontal because prices tend to be fixed. 
C) It is vertical at the capacity level of output in the economy. 
D) It is upward-sloping since higher outputs will only be produced at higher price levels. 
E) It is horizontal because supply creates its own demand.

Question 10

When does macroeconomic equilibrium occur?

Accepted Answer

A) When aggregate supply equals long-run aggregate supply. 
B) When the aggregate demand curve intersects the aggregate supply curve. 
C) When the aggregate demand curve intersects the LAS curve. 
D) When full employment occurs. 
A) When aggregate supply equals long-run aggregate supply. 
B) When the aggregate demand curve intersects the aggregate supply curve. 
C) When the aggregate demand curve intersects the LAS curve. 
D) When full employment occurs.

Question 11

Which of the following will cause an increase in aggregate supply?

Accepted Answer

A) An increase in government spending. 
B) An increase in exchange rates. 
C) An increase in the labour force participation rate. 
D) An increase in factor prices. 
A) An increase in government spending. 
B) An increase in exchange rates. 
C) An increase in the labour force participation rate. 
D) An increase in factor prices.

Question 12

What will cause the AS curve to shift?

Accepted Answer

A) A rise in money wages. 
B) A change in the capital stock. 
C) The introduction of technological change. 
D) A rise in money wages,a change in the capital stock and the introduction of technological change. 
A) A rise in money wages. 
B) A change in the capital stock. 
C) The introduction of technological change. 
D) A rise in money wages,a change in the capital stock and the introduction of technological change.

Question 13

Which of the following will most likely lead to long-term economic growth?

Accepted Answer

A) A decrease in the interest rate. 
B) A decrease in the price level. 
C) An increase in consumer spending. 
D) A decrease in the quantity of labour resources. 
E) An increase in the quality of labour resources. 
A) A decrease in the interest rate. 
B) A decrease in the price level. 
C) An increase in consumer spending. 
D) A decrease in the quantity of labour resources. 
E) An increase in the quality of labour resources.

Question 14

What is the business cycle?

Accepted Answer

A) The periodic cycles of profits and losses that all firms experience. 
B) The natural evolution of new firms growing quickly at first,then slowing and fading into obsolescence. 
C) The fact that Real GDP falls as often as it rises. 
D) The expansionary and contractionary phases in the growth rate of Real GDP. 
A) The periodic cycles of profits and losses that all firms experience. 
B) The natural evolution of new firms growing quickly at first,then slowing and fading into obsolescence. 
C) The fact that Real GDP falls as often as it rises. 
D) The expansionary and contractionary phases in the growth rate of Real GDP.

Question 15

Assuming that the price level remains unchanged,what will an increase in money wages do?

Accepted Answer

A) It will not affect price or output levels. 
B) It will affect the LAS curve. 
C) It will mean higher profits and production levels. 
D) It will mean lower profits and production levels. 
E) It will mean lower profits and no change in production levels. 
A) It will not affect price or output levels. 
B) It will affect the LAS curve. 
C) It will mean higher profits and production levels. 
D) It will mean lower profits and production levels. 
E) It will mean lower profits and no change in production levels.

Question 16

-Refer to the above graph to answer this question.What could cause the movement from point A to point B?

Accepted Answer

A) A decrease in labour costs. 
B) A decrease in labour productivity. 
C) A decrease in the interest rate. 
D) An increase in productivity. 
E) A decrease in government spending. 
A) A decrease in labour costs. 
B) A decrease in labour productivity. 
C) A decrease in the interest rate. 
D) An increase in productivity. 
E) A decrease in government spending.

Question 17

Assume an economy is currently in equilibrium with Real GDP at $1,627 billion.If potential Real GDP (LAS)is $1,800 billion,which of the following is true?

Accepted Answer

A) There is a recessionary gap of 173 percent. 
B) There is an inflationary gap of 173 percent. 
C) There is a recessionary gap of $173 billion. 
D) There is an inflationary gap of $173 billion. 
A) There is a recessionary gap of 173 percent. 
B) There is an inflationary gap of 173 percent. 
C) There is a recessionary gap of $173 billion. 
D) There is an inflationary gap of $173 billion.

Question 18

Table 5.2 shows the aggregate demand and supply schedules for the economy of Adana.
  
-Refer to Table 5.2 to answer this question.What are the implications if the price level is 100?

Accepted Answer

A) The price level is above equilibrium. 
B) There is a shortage of real output of $250. 
C) There is a surplus of real output of $250. 
D) There is a surplus of real output of $150. 
A) The price level is above equilibrium. 
B) There is a shortage of real output of $250. 
C) There is a surplus of real output of $250. 
D) There is a surplus of real output of $150.

Question 19

What does the interest-rate effect mean?

Accepted Answer

A) That an increase in the money supply will increase the rate of interest and cause investment to fall. 
B) That a decrease in prices will reduce the rate of interest which will cause investment to increase. 
C) That an increase in the price level will decrease interest rates,and decrease consumption and investment spending. 
D) That an increase in the price level will decrease the demand for money and spending. 
E) That an increase in Real GDP will increase the price level. 
A) That an increase in the money supply will increase the rate of interest and cause investment to fall. 
B) That a decrease in prices will reduce the rate of interest which will cause investment to increase. 
C) That an increase in the price level will decrease interest rates,and decrease consumption and investment spending. 
D) That an increase in the price level will decrease the demand for money and spending. 
E) That an increase in Real GDP will increase the price level.

Question 20

What is a recessionary gap?

Accepted Answer

A) The difference between nominal and Real GDP. 
B) The difference between actual and potential Real GDP when the economy is below its potential. 
C) The difference between the quantity of goods and services demanded and supplied. 
D) The difference between actual and potential Real GDP when the economy is above full employment. 
A) The difference between nominal and Real GDP. 
B) The difference between actual and potential Real GDP when the economy is below its potential. 
C) The difference between the quantity of goods and services demanded and supplied. 
D) The difference between actual and potential Real GDP when the economy is above full employment.

What is meant by the term human capital?

Explain the modern view of the aggregate supply curve.

All of the following,except,one are correct statements about labour productivity.Which is the exception?

What is the shape of the AS curve according to Keynesians?

According to Keynes,the aggregate supply curve is vertical.

All of the following,except one,will shift the aggregate the demand to the right.Which is the exception?

At low levels of Real GDP,what is the result of a decrease in aggregate demand?

According to neoclassical economists,what is true of the aggregate supply curve?

When does macroeconomic equilibrium occur?

Which of the following will cause an increase in aggregate supply?

What will cause the AS curve to shift?

Which of the following will most likely lead to long-term economic growth?

What is the business cycle?

Assuming that the price level remains unchanged,what will an increase in money wages do?

-Refer to the above graph to answer this question.What could cause the movement from point A to point B?

Assume an economy is currently in equilibrium with Real GDP at $1,627 billion.If potential Real GDP (LAS)is $1,800 billion,which of the following is true?

Table 5.2 shows the aggregate demand and supply schedules for the economy of Adana. -Refer to Table 5.2 to answer this question.What are the implications if the price level is 100?

What does the interest-rate effect mean?

What is a recessionary gap?

The Economic Problem

Demand and Supply: an Introduction

Measuring the Economy 1: GDP and Economic Growth

Measuring the Economy 2: Unemployment and Inflation

Aggregate Expenditures

Fiscal Policy

Money and Banking

The Money Market and Monetary Policy

International Trade

Exchange Rates and the Balance of Payments

Macroeconomic Policy Revisited

A Walk Through the Twentieth Century and Beyond

Filters

Exam 5: Aggregate Demand and Supply

What is meant by the term human capital?

Explain the modern view of the aggregate supply curve.

All of the following,except,one are correct statements about labour productivity.Which is the exception?

What is the shape of the AS curve according to Keynesians?

According to Keynes,the aggregate supply curve is vertical.

All of the following,except one,will shift the aggregate the demand to the right.Which is the exception?

At low levels of Real GDP,what is the result of a decrease in aggregate demand?

According to neoclassical economists,what is true of the aggregate supply curve?

When does macroeconomic equilibrium occur?

Which of the following will cause an increase in aggregate supply?

What will cause the AS curve to shift?

Which of the following will most likely lead to long-term economic growth?

What is the business cycle?

Assuming that the price level remains unchanged,what will an increase in money wages do?

-Refer to the above graph to answer this question.What could cause the movement from point A to point B?

Assume an economy is currently in equilibrium with Real GDP at $1,627 billion.If potential Real GDP (LAS)is $1,800 billion,which of the following is true?

Table 5.2 shows the aggregate demand and supply schedules for the economy of Adana. -Refer to Table 5.2 to answer this question.What are the implications if the price level is 100?

What does the interest-rate effect mean?

What is a recessionary gap?

The Economic Problem

Demand and Supply: an Introduction

Measuring the Economy 1: GDP and Economic Growth

Measuring the Economy 2: Unemployment and Inflation

Aggregate Expenditures

Fiscal Policy

Money and Banking

The Money Market and Monetary Policy

International Trade

Exchange Rates and the Balance of Payments

Macroeconomic Policy Revisited

A Walk Through the Twentieth Century and Beyond

Filters