Question 1

Over the horizontal range of the economy's AS curve (assuming such a range exists),a rightward shift of the AD curve will result in

Accepted Answer

A) an increase in prices and no change in real GDP. 
B) an increase in real GDP and no change in prices. 
C) an increase in both real GDP and prices. 
D) a decrease in both real GDP and prices. 
E) a decrease in real GDP but no change in prices. 
A) an increase in prices and no change in real GDP. 
B) an increase in real GDP and no change in prices. 
C) an increase in both real GDP and prices. 
D) a decrease in both real GDP and prices. 
E) a decrease in real GDP but no change in prices. B

Question 2

Which of the following explains why we assume that the economy's aggregate supply (AS)curve has a positive slope?

Accepted Answer

A) Inputs become more expensive at higher levels of output. 
B) Inputs become less expensive at higher levels of output. 
C) Firms' unit costs rise as output increases. 
D) Firms' unit costs fall as output increases. 
E) Aggregate demand increases at higher levels of national income. 
A) Inputs become more expensive at higher levels of output. 
B) Inputs become less expensive at higher levels of output. 
C) Firms' unit costs rise as output increases. 
D) Firms' unit costs fall as output increases. 
E) Aggregate demand increases at higher levels of national income. C

Question 3

Aggregate supply shocks cause the price level and real GDP to change in

Accepted Answer

A) the same direction with price changing by more than output. 
B) the same direction and by the same amount. 
C) opposite directions with price changing by less than output. 
D) opposite directions and not necessarily by the same amount. 
E) opposite directions but by the same amount. 
A) the same direction with price changing by more than output. 
B) the same direction and by the same amount. 
C) opposite directions with price changing by less than output. 
D) opposite directions and not necessarily by the same amount. 
E) opposite directions but by the same amount. D

Question 4

FIGURE 23-5 Refer to Figure 23-5.Suppose that an increase in autonomous investment caused the AD curve to shift to the right,as shown.If the simple multiplier in this model is 5,then what is the value of the multiplier?

Accepted Answer

A) 1.2 
B) 1.5 
C) 4.0 
D) 5.0 
E) not enough information to know 
A) 1.2 
B) 1.5 
C) 4.0 
D) 5.0 
E) not enough information to know

Question 5

Consider the AD/AS model.Suppose there is a decrease in aggregate demand and,simultaneously,an increase in aggregate supply.The result will be a

Accepted Answer

A) rise in real GDP but price level changes will be indeterminate. 
B) rise in real GDP and a rise in the price level. 
C) rise in real GDP and a fall in the price level. 
D) an indeterminate change in real GDP and a rise in the price level. 
E) an indeterminate change in real GDP and a fall in the price level. 
A) rise in real GDP but price level changes will be indeterminate. 
B) rise in real GDP and a rise in the price level. 
C) rise in real GDP and a fall in the price level. 
D) an indeterminate change in real GDP and a rise in the price level. 
E) an indeterminate change in real GDP and a fall in the price level.

Question 6

Which of the following events would cause the AE function to shift upwards in a parallel way?

Accepted Answer

A) an increase in the MPC 
B) a decrease in the net tax rate 
C) a decrease in the business confidence of firms 
D) a decrease in foreign income 
E) a decrease in the aggregate price level 
A) an increase in the MPC 
B) a decrease in the net tax rate 
C) a decrease in the business confidence of firms 
D) a decrease in foreign income 
E) a decrease in the aggregate price level

Question 7

FIGURE 23-5 Refer to Figure 23-5.Suppose that an increase in autonomous investment caused the AD curve to shift to the right,as shown.If the simple multiplier in this model is 4,then how much was the increase in investment?

Accepted Answer

A) 30 
B) 40 
C) 50 
D) 12 
E) not enough information to know 
A) 30 
B) 40 
C) 50 
D) 12 
E) not enough information to know

Question 8

Consider the economy's aggregate supply curve.Other things being equal,firms' unit costs will tend to fall if

Accepted Answer

A) there is a rise in the price of oil. 
B) the government increases payroll taxes. 
C) wages fall. 
D) wage and price controls are in effect. 
E) wage increases are less than productivity increases. 
A) there is a rise in the price of oil. 
B) the government increases payroll taxes. 
C) wages fall. 
D) wage and price controls are in effect. 
E) wage increases are less than productivity increases.

Question 9

Consider the following news headline: "Governments plan massive hospital construction programs across the country." Choose the statement below that best describes the likely macroeconomic effects.

Accepted Answer

A) The AD curve shifts to the left; the price level falls and real GDP falls. 
B) The AD curve shifts to the right; the price level rises and real GDP rises. 
C) The AD curve shifts to the right and the AS curve shifts to the left; the price level rises and the effect on real GDP is indeterminate. 
D) The AD curve shifts to the left and the AS curve shifts to the right; the price level falls and the effect on real GDP is indeterminate. 
E) The AD and AS curves both shift to the right; the effect on the price level is indeterminate and real GDP rises. 
A) The AD curve shifts to the left; the price level falls and real GDP falls. 
B) The AD curve shifts to the right; the price level rises and real GDP rises. 
C) The AD curve shifts to the right and the AS curve shifts to the left; the price level rises and the effect on real GDP is indeterminate. 
D) The AD curve shifts to the left and the AS curve shifts to the right; the price level falls and the effect on real GDP is indeterminate. 
E) The AD and AS curves both shift to the right; the effect on the price level is indeterminate and real GDP rises.

Question 10

In the basic AD/AS model,the effect of an aggregate demand shock is divided between a change in output and a change in the price level.How the effect is divided depends on the

Accepted Answer

A) amount of inflation in the economy. 
B) position of the AE curve. 
C) size of the simple multiplier. 
D) slope of the AD curve. 
E) slope of the AS curve. 
A) amount of inflation in the economy. 
B) position of the AE curve. 
C) size of the simple multiplier. 
D) slope of the AD curve. 
E) slope of the AS curve.

Question 11

FIGURE 23-3 Refer to Figure 23-3.Which of the following statements best describes the supply side of Economy B?

Accepted Answer

A) Unit costs are rising rapidly,but firms can produce more output by employing standby capacity and overtime labour,for example,with no increase in the price level. 
B) Firms are producing well below their capacity and are willing to produce more only if prices rise. 
C) Unit costs are rising rapidly as firms are producing beyond their capacity.Firms will produce more only if prices increase. 
D) Firms are producing well below their capacity and are willing to produce more output with no increase in price. 
E) Firms are not able to produce more output because there is no excess capacity in the economy. 
A) Unit costs are rising rapidly,but firms can produce more output by employing standby capacity and overtime labour,for example,with no increase in the price level. 
B) Firms are producing well below their capacity and are willing to produce more only if prices rise. 
C) Unit costs are rising rapidly as firms are producing beyond their capacity.Firms will produce more only if prices increase. 
D) Firms are producing well below their capacity and are willing to produce more output with no increase in price. 
E) Firms are not able to produce more output because there is no excess capacity in the economy.

Question 12

In the short run,the aggregate supply curve has a positive slope because,as the price level rises,producers can

Accepted Answer

A) accumulate inventories. 
B) charge a higher price sufficient to cover their higher unit costs. 
C) experience rising factor prices. 
D) produce less in response to falling profits. 
E) increase output at unchanged unit costs. 
A) accumulate inventories. 
B) charge a higher price sufficient to cover their higher unit costs. 
C) experience rising factor prices. 
D) produce less in response to falling profits. 
E) increase output at unchanged unit costs.

Question 13

Which of the following could cause the economy's AS curve to shift upward in the short run?

Accepted Answer

A) an increase in the cost of capital 
B) a decrease in the cost of capital 
C) a decrease in nominal wages 
D) a decrease in the price level 
E) an improvement in technology 
A) an increase in the cost of capital 
B) a decrease in the cost of capital 
C) a decrease in nominal wages 
D) a decrease in the price level 
E) an improvement in technology

Question 14

Consider a simple macro-model with demand-determined output.An exogenous increase in the domestic price level will ________ the real value of the private sector's wealth,which leads to ________ in autonomous consumption and thus ________ shift in the AE function.

Accepted Answer

A) increase; a decrease; a downward 
B) increase; an increase; a downward 
C) increase; an increase; an upward 
D) reduce; a decrease; a downward 
E) reduce; an increase; an upward 
A) increase; a decrease; a downward 
B) increase; an increase; a downward 
C) increase; an increase; an upward 
D) reduce; a decrease; a downward 
E) reduce; an increase; an upward

Question 15

FIGURE 23-4 Refer to Figure 23-4.Suppose the Canadian economy is initially in equilibrium at point A.An unexpected shock then shifts both the AD and the AS curves as shown and results in a new equilibrium represented by point B.Which of the following events could cause such a shock?

Accepted Answer

A) an increase in the net tax rate 
B) a decrease in firms' desired investment expenditures 
C) an increase in factor prices 
D) a decrease in labour productivity 
E) a decrease in the world price of oil 
A) an increase in the net tax rate 
B) a decrease in firms' desired investment expenditures 
C) an increase in factor prices 
D) a decrease in labour productivity 
E) a decrease in the world price of oil

Question 16

FIGURE 23-2 Refer to Figure 23-2.Which of the following events could cause the upward shift of the AS curve?

Accepted Answer

A) improvements in communications technology 
B) a decrease in business confidence that reduces desired investment 
C) a recession in the U.S.that reduces our net exports 
D) a major discovery of new oil reserves that will increase the world supply 
E) a massive drought that reduces agricultural output 
A) improvements in communications technology 
B) a decrease in business confidence that reduces desired investment 
C) a recession in the U.S.that reduces our net exports 
D) a major discovery of new oil reserves that will increase the world supply 
E) a massive drought that reduces agricultural output

Question 17

Which of the following would likely cause a downward parallel shift in the AE curve and a leftward shift in the AD curve?

Accepted Answer

A) an increase in the business confidence of firms 
B) a reduction in government purchases 
C) a decrease in the MPC 
D) a decrease in the price level 
E) an increase in the price level 
A) an increase in the business confidence of firms 
B) a reduction in government purchases 
C) a decrease in the MPC 
D) a decrease in the price level 
E) an increase in the price level

Question 18

Which of the following could cause a movement along the economy's AS curve?

Accepted Answer

A) a change in labour productivity 
B) a change in the cost of capital 
C) a change in the price level 
D) a change in technology 
E) a change in the wage rate 
A) a change in labour productivity 
B) a change in the cost of capital 
C) a change in the price level 
D) a change in technology 
E) a change in the wage rate

Question 19

Consider the basic AD/AS model.When wage rates rise faster than the increase in labour productivity,the

Accepted Answer

A) AD curve shifts left. 
B) AS curve shifts upward. 
C) output gap falls. 
D) output gap increases. 
E) AS curve shifts downward. 
A) AD curve shifts left. 
B) AS curve shifts upward. 
C) output gap falls. 
D) output gap increases. 
E) AS curve shifts downward.

Question 20

FIGURE 23-1 Refer to Figure 23-1.Assume the economy is initially in equilibrium with desired aggregate expenditure equal to real GDP at point V.The price level is P0.Now,suppose the AE curve shifts to AE1 and we move to a new equilibrium level of GDP at Y1 and point F on AD1.A possible cause of this change in equilibrium is

Accepted Answer

A) an exogenous rise in the price level. 
B) an exogenous fall in the price level. 
C) an increase in autonomous consumption. 
D) a decrease in desired net exports. 
E) an increase in government purchases. 
A) an exogenous rise in the price level. 
B) an exogenous fall in the price level. 
C) an increase in autonomous consumption. 
D) a decrease in desired net exports. 
E) an increase in government purchases.

Over the horizontal range of the economy's AS curve (assuming such a range exists),a rightward shift of the AD curve will result in

Which of the following explains why we assume that the economy's aggregate supply (AS)curve has a positive slope?

Aggregate supply shocks cause the price level and real GDP to change in

FIGURE 23-5 Refer to Figure 23-5.Suppose that an increase in autonomous investment caused the AD curve to shift to the right,as shown.If the simple multiplier in this model is 5,then what is the value of the multiplier?

Consider the AD/AS model.Suppose there is a decrease in aggregate demand and,simultaneously,an increase in aggregate supply.The result will be a

Which of the following events would cause the AE function to shift upwards in a parallel way?

FIGURE 23-5 Refer to Figure 23-5.Suppose that an increase in autonomous investment caused the AD curve to shift to the right,as shown.If the simple multiplier in this model is 4,then how much was the increase in investment?

Consider the economy's aggregate supply curve.Other things being equal,firms' unit costs will tend to fall if

Consider the following news headline: "Governments plan massive hospital construction programs across the country." Choose the statement below that best describes the likely macroeconomic effects.

In the basic AD/AS model,the effect of an aggregate demand shock is divided between a change in output and a change in the price level.How the effect is divided depends on the

FIGURE 23-3 Refer to Figure 23-3.Which of the following statements best describes the supply side of Economy B?

In the short run,the aggregate supply curve has a positive slope because,as the price level rises,producers can

Which of the following could cause the economy's AS curve to shift upward in the short run?

Consider a simple macro-model with demand-determined output.An exogenous increase in the domestic price level will the real value of the private sector's wealth,which leads to in autonomous consumption and thus shift in the AE function.

FIGURE 23-4 Refer to Figure 23-4.Suppose the Canadian economy is initially in equilibrium at point A.An unexpected shock then shifts both the AD and the AS curves as shown and results in a new equilibrium represented by point B.Which of the following events could cause such a shock?

FIGURE 23-2 Refer to Figure 23-2.Which of the following events could cause the upward shift of the AS curve?

Which of the following would likely cause a downward parallel shift in the AE curve and a leftward shift in the AD curve?

Which of the following could cause a movement along the economy's AS curve?

Consider the basic AD/AS model.When wage rates rise faster than the increase in labour productivity,the

Economic Issues and Concepts

Economic Theories, data, and Graphs

Demand, supply, and Price

What Macroeconomics Is All About

The Measurement of National Income

The Simplest Short-Run Macro Model

Adding Government and Trade to the Simple Macro Model

From the Short Run to the Long Run: the Adjustment of Factor Prices

Long-Run Economic Growth

Money and Banking

Money, interest Rates, and Economic Activity

Monetary Policy in Canada

Inflation and Disinflation

Unemployment Fluctuations and the Nairu

Government Debt and Deficits

The Gains From International Trade

Trade Policy

Exchange Rates and the Balance of Payments

Filters

Exam 23: Real Gdp and the Price Level in the Short Run

Over the horizontal range of the economy's AS curve (assuming such a range exists),a rightward shift of the AD curve will result in

Which of the following explains why we assume that the economy's aggregate supply (AS)curve has a positive slope?

Aggregate supply shocks cause the price level and real GDP to change in

FIGURE 23-5 Refer to Figure 23-5.Suppose that an increase in autonomous investment caused the AD curve to shift to the right,as shown.If the simple multiplier in this model is 5,then what is the value of the multiplier?

Consider the AD/AS model.Suppose there is a decrease in aggregate demand and,simultaneously,an increase in aggregate supply.The result will be a

Which of the following events would cause the AE function to shift upwards in a parallel way?

FIGURE 23-5 Refer to Figure 23-5.Suppose that an increase in autonomous investment caused the AD curve to shift to the right,as shown.If the simple multiplier in this model is 4,then how much was the increase in investment?

Consider the economy's aggregate supply curve.Other things being equal,firms' unit costs will tend to fall if

Consider the following news headline: "Governments plan massive hospital construction programs across the country." Choose the statement below that best describes the likely macroeconomic effects.

In the basic AD/AS model,the effect of an aggregate demand shock is divided between a change in output and a change in the price level.How the effect is divided depends on the

FIGURE 23-3 Refer to Figure 23-3.Which of the following statements best describes the supply side of Economy B?

In the short run,the aggregate supply curve has a positive slope because,as the price level rises,producers can

Which of the following could cause the economy's AS curve to shift upward in the short run?

Consider a simple macro-model with demand-determined output.An exogenous increase in the domestic price level will ________ the real value of the private sector's wealth,which leads to ________ in autonomous consumption and thus ________ shift in the AE function.

FIGURE 23-4 Refer to Figure 23-4.Suppose the Canadian economy is initially in equilibrium at point A.An unexpected shock then shifts both the AD and the AS curves as shown and results in a new equilibrium represented by point B.Which of the following events could cause such a shock?

FIGURE 23-2 Refer to Figure 23-2.Which of the following events could cause the upward shift of the AS curve?

Which of the following would likely cause a downward parallel shift in the AE curve and a leftward shift in the AD curve?

Which of the following could cause a movement along the economy's AS curve?

Consider the basic AD/AS model.When wage rates rise faster than the increase in labour productivity,the

Economic Issues and Concepts

Economic Theories, data, and Graphs

Demand, supply, and Price

What Macroeconomics Is All About

The Measurement of National Income

The Simplest Short-Run Macro Model

Adding Government and Trade to the Simple Macro Model

From the Short Run to the Long Run: the Adjustment of Factor Prices

Long-Run Economic Growth

Money and Banking

Money, interest Rates, and Economic Activity

Monetary Policy in Canada

Inflation and Disinflation

Unemployment Fluctuations and the Nairu

Government Debt and Deficits

The Gains From International Trade

Trade Policy

Exchange Rates and the Balance of Payments

Filters

Consider a simple macro-model with demand-determined output.An exogenous increase in the domestic price level will the real value of the private sector's wealth,which leads to in autonomous consumption and thus shift in the AE function.