Question 1

Consider the relationship between the AE curve and the AD curve.A decline in the amount of desired net exports at each level of national income

Accepted Answer

A) shifts the AD curve to the right. 
B) shifts the AD curve to the left. 
C) causes a movement up along the AD curve. 
D) causes a movement down along the AD curve. 
E) causes an upward shift of the AE curve but no movement of the AD curve. 
A) shifts the AD curve to the right. 
B) shifts the AD curve to the left. 
C) causes a movement up along the AD curve. 
D) causes a movement down along the AD curve. 
E) causes an upward shift of the AE curve but no movement of the AD curve.

Question 2

Other things being equal,what is the effect of an exogenous fall in the domestic price level?

Accepted Answer

A) Canadian goods become more expensive relative to foreign goods. 
B) The net export function shifts upward. 
C) The aggregate expenditure function shifts downward. 
D) Imports of foreign goods rise. 
E) The net export function shifts downward. 
A) Canadian goods become more expensive relative to foreign goods. 
B) The net export function shifts upward. 
C) The aggregate expenditure function shifts downward. 
D) Imports of foreign goods rise. 
E) The net export function shifts downward.

Question 3

Other things being equal,what is the effect of an exogenous rise in the domestic price level?

Accepted Answer

A) Canadian goods become more expensive relative to foreign goods. 
B) The net export function shifts upward. 
C) The aggregate expenditure function shifts upward. 
D) Imports of foreign goods fall. 
E) The desired investment function shifts upward. 
A) Canadian goods become more expensive relative to foreign goods. 
B) The net export function shifts upward. 
C) The aggregate expenditure function shifts upward. 
D) Imports of foreign goods fall. 
E) The desired investment function shifts upward.

Question 4

Consider the basic AD/AS model with a very steep,positively sloped AS curve.A negative aggregate demand shock will result in

Accepted Answer

A) an increase in the price level and a decrease in real national income. 
B) an increase in both the price level and real national income. 
C) a decrease in the price level with almost no change in real national income. 
D) a decrease in the price level and an increase in real national income. 
E) no change in either price level or output. 
A) an increase in the price level and a decrease in real national income. 
B) an increase in both the price level and real national income. 
C) a decrease in the price level with almost no change in real national income. 
D) a decrease in the price level and an increase in real national income. 
E) no change in either price level or output.

Question 5

If the economy's AS curve is vertical,the multiplier in the AD/AS model is

Accepted Answer

A) infinitely large. 
B) equal to the simple multiplier. 
C) smaller than the simple multiplier. 
D) zero. 
E) negative. 
A) infinitely large. 
B) equal to the simple multiplier. 
C) smaller than the simple multiplier. 
D) zero. 
E) negative.

Question 6

Consider the basic AD/AS model.Suppose firms are currently producing beyond their normal capacity.A change in AD leads to a relatively

Accepted Answer

A) large change in price level and a large change in real GDP. 
B) large change in price level and a small change in real GDP. 
C) small change in price level and a large change in real GDP. 
D) small change in price level and a small change in real GDP. 
E) no change in both price and output. 
A) large change in price level and a large change in real GDP. 
B) large change in price level and a small change in real GDP. 
C) small change in price level and a large change in real GDP. 
D) small change in price level and a small change in real GDP. 
E) no change in both price and output.

Question 7

Other things being equal,what is the effect of an exogenous rise in the domestic price level?

Accepted Answer

A) a decrease in real saving 
B) a decrease in the real value of all assets denominated in money units 
C) domestic goods become more attractive to foreigners 
D) foreign goods become less attractive to domestic residents 
E) an increase in the real burden of repaying a fixed money value debt 
A) a decrease in real saving 
B) a decrease in the real value of all assets denominated in money units 
C) domestic goods become more attractive to foreigners 
D) foreign goods become less attractive to domestic residents 
E) an increase in the real burden of repaying a fixed money value debt

Question 8

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) a decrease in the price of raw materials 
B) a decrease in the world supply of oil as a result of a major hurricane 
C) improved quality of the national education system 
D) rapid technological advances in mass production 
E) an increase in consumption 
A) a decrease in the price of raw materials 
B) a decrease in the world supply of oil as a result of a major hurricane 
C) improved quality of the national education system 
D) rapid technological advances in mass production 
E) an increase in consumption

Question 9

Consider two economies,A and B.Economy A has a marginal propensity to consume of 0.9,a net tax rate of 0.3 and a marginal propensity to import of 0.3.Economy B has a marginal propensity to consume of 0.9,a net tax rate of 0.1 and a marginal propensity to import of 0.3.Suppose there is an increase in autonomous investment of $5 billion in each of these economies.Which of the following statements is true?

Accepted Answer

A) The AD curve shifts farther to the left in Economy B than Economy A. 
B) The AD curve shifts farther to the right in Economy B than Economy A. 
C) The AD curve shifts to the left the same amount in both economies. 
D) The AD curve shifts to the right the same amount in both economies. 
E) The simple multiplier is larger in Economy A. 
A) The AD curve shifts farther to the left in Economy B than Economy A. 
B) The AD curve shifts farther to the right in Economy B than Economy A. 
C) The AD curve shifts to the left the same amount in both economies. 
D) The AD curve shifts to the right the same amount in both economies. 
E) The simple multiplier is larger in Economy A.

Question 10

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

Accepted Answer

A) a decrease in labour productivity 
B) a decrease in the cost of capital inputs 
C) a decrease in the price level 
D) an increase in the price level 
E) an increase in nominal wages 
A) a decrease in labour productivity 
B) a decrease in the cost of capital inputs 
C) a decrease in the price level 
D) an increase in the price level 
E) an increase in nominal wages

Question 11

Which of the following could cause a leftward shift of the aggregate demand (AD)curve?

Accepted Answer

A) a decrease in autonomous government purchases 
B) a decrease in induced imports 
C) a decrease in the net tax rate 
D) a decrease in autonomous desired saving 
E) a decrease in the price level 
A) a decrease in autonomous government purchases 
B) a decrease in induced imports 
C) a decrease in the net tax rate 
D) a decrease in autonomous desired saving 
E) a decrease in the price level

Question 12

Consider the following news headline: "Information technology costs for Canadian firms continue to drop." Choose the statement below that best describes the likely macroeconomic effect.

Accepted Answer

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

Question 13

If the AS curve is vertical and there is a decrease in aggregate demand,the result is

Accepted Answer

A) a decrease in the price level with no change in real GDP. 
B) an equal decrease in national income. 
C) an increase in the price level. 
D) an increase in national income. 
E) no change in either price level or real GDP. 
A) a decrease in the price level with no change in real GDP. 
B) an equal decrease in national income. 
C) an increase in the price level. 
D) an increase in national income. 
E) no change in either price level or real GDP.

Question 14

Other things being equal,as the price level falls exogenously,the aggregate expenditure (AE)function shifts

Accepted Answer

A) down and the economy will move upward along the AD curve. 
B) down and the economy will move downward along the AD curve. 
C) upward and the economy moves upward along the AD curve. 
D) upward and the economy moves downward along the AD curve. 
E) to the left,as does the AD curve. 
A) down and the economy will move upward along the AD curve. 
B) down and the economy will move downward along the AD curve. 
C) upward and the economy moves upward along the AD curve. 
D) upward and the economy moves downward along the AD curve. 
E) to the left,as does the AD curve.

Question 15

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.Other things being equal,exogenous changes in the price level will cause

Accepted Answer

A) movement along the aggregate expenditure curve AE0 and shifts of the AD curve. 
B) movement along the aggregate expenditure curve AE0 and movement along the aggregate demand curve AD0. 
C) shifts of the AE curve and shifts of the AD curve. 
D) shifts of the AE curve and movement along the aggregate demand curve AD0. 
E) no change in either the AE curve or the AD curve. 
A) movement along the aggregate expenditure curve AE0 and shifts of the AD curve. 
B) movement along the aggregate expenditure curve AE0 and movement along the aggregate demand curve AD0. 
C) shifts of the AE curve and shifts of the AD curve. 
D) shifts of the AE curve and movement along the aggregate demand curve AD0. 
E) no change in either the AE curve or the AD curve.

Question 16

Consider the nature of macroeconomic equilibrium.If,at a particular price level,the total output demanded is greater than that supplied by producers,then

Accepted Answer

A) the price level will decline toward its equilibrium value. 
B) the price level will rise toward its equilibrium value. 
C) the aggregate demand curve will shift to the left,re-establishing an equilibrium. 
D) the aggregate supply curve will shift to the right,re-establishing an equilibrium. 
E) the aggregate supply curve will shift to the left,re-establishing equilibrium. 
A) the price level will decline toward its equilibrium value. 
B) the price level will rise toward its equilibrium value. 
C) the aggregate demand curve will shift to the left,re-establishing an equilibrium. 
D) the aggregate supply curve will shift to the right,re-establishing an equilibrium. 
E) the aggregate supply curve will shift to the left,re-establishing equilibrium.

Question 17

Which of the following could cause a leftward shift in the aggregate demand (AD)curve?

Accepted Answer

A) an increase in autonomous exports 
B) an increase in autonomous government purchases 
C) an increase in government transfer payments to households 
D) an increase in desired investment 
E) an increase in autonomous desired savings 
A) an increase in autonomous exports 
B) an increase in autonomous government purchases 
C) an increase in government transfer payments to households 
D) an increase in desired investment 
E) an increase in autonomous desired savings

Question 18

Consider the basic AD/AS model.If major labour unions succeed in increasing wages across the economy,the AS curve will shift

Accepted Answer

A) downward (to the right),reducing the price level. 
B) downward (to the right)and then return immediately to its original position. 
C) upward (to the left)and then return immediately to its original position. 
D) upward (to the left),increasing the price level. 
E) None of the above; there will no effect on the AS curve. 
A) downward (to the right),reducing the price level. 
B) downward (to the right)and then return immediately to its original position. 
C) upward (to the left)and then return immediately to its original position. 
D) upward (to the left),increasing the price level. 
E) None of the above; there will no effect on the AS curve.

Question 19

Consider the AD/AS model.An increase in government purchases will have no impact on equilibrium real GDP if

Accepted Answer

A) the AS curve slopes upward. 
B) the AS curve is vertical. 
C) the AS curve is horizontal. 
D) the marginal propensity to spend is very small. 
E) the simple multiplier is very small. 
A) the AS curve slopes upward. 
B) the AS curve is vertical. 
C) the AS curve is horizontal. 
D) the marginal propensity to spend is very small. 
E) the simple multiplier is very small.

Question 20

If the economy is in macroeconomic equilibrium with a vertical AS curve,and then aggregate demand increases,we expect the AE function to shift to a

Accepted Answer

A) higher level and stay there. 
B) higher level,but then shift part of the way down to its original position as the price level rises. 
C) higher level but then return to its original position as the price level rises. 
D) lower level and stay there. 
E) lower level,but then return to its original position as the price level rises. 
A) higher level and stay there. 
B) higher level,but then shift part of the way down to its original position as the price level rises. 
C) higher level but then return to its original position as the price level rises. 
D) lower level and stay there. 
E) lower level,but then return to its original position as the price level rises.

Consider the relationship between the AE curve and the AD curve.A decline in the amount of desired net exports at each level of national income

Other things being equal,what is the effect of an exogenous fall in the domestic price level?

Other things being equal,what is the effect of an exogenous rise in the domestic price level?

Consider the basic AD/AS model with a very steep,positively sloped AS curve.A negative aggregate demand shock will result in

If the economy's AS curve is vertical,the multiplier in the AD/AS model is

Consider the basic AD/AS model.Suppose firms are currently producing beyond their normal capacity.A change in AD leads to a relatively

Other things being equal,what is the effect of an exogenous rise in the domestic price level?

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 could cause the economy's AS curve to shift downward in the short run?

Which of the following could cause a leftward shift of the aggregate demand (AD)curve?

Consider the following news headline: "Information technology costs for Canadian firms continue to drop." Choose the statement below that best describes the likely macroeconomic effect.

If the AS curve is vertical and there is a decrease in aggregate demand,the result is

Other things being equal,as the price level falls exogenously,the aggregate expenditure (AE)function shifts

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.Other things being equal,exogenous changes in the price level will cause

Consider the nature of macroeconomic equilibrium.If,at a particular price level,the total output demanded is greater than that supplied by producers,then

Which of the following could cause a leftward shift in the aggregate demand (AD)curve?

Consider the basic AD/AS model.If major labour unions succeed in increasing wages across the economy,the AS curve will shift

Consider the AD/AS model.An increase in government purchases will have no impact on equilibrium real GDP if

If the economy is in macroeconomic equilibrium with a vertical AS curve,and then aggregate demand increases,we expect the AE function to shift to a

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

Consider the relationship between the AE curve and the AD curve.A decline in the amount of desired net exports at each level of national income

Other things being equal,what is the effect of an exogenous fall in the domestic price level?

Other things being equal,what is the effect of an exogenous rise in the domestic price level?

Consider the basic AD/AS model with a very steep,positively sloped AS curve.A negative aggregate demand shock will result in

If the economy's AS curve is vertical,the multiplier in the AD/AS model is

Consider the basic AD/AS model.Suppose firms are currently producing beyond their normal capacity.A change in AD leads to a relatively

Other things being equal,what is the effect of an exogenous rise in the domestic price level?

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 could cause the economy's AS curve to shift downward in the short run?

Which of the following could cause a leftward shift of the aggregate demand (AD)curve?

Consider the following news headline: "Information technology costs for Canadian firms continue to drop." Choose the statement below that best describes the likely macroeconomic effect.

If the AS curve is vertical and there is a decrease in aggregate demand,the result is

Other things being equal,as the price level falls exogenously,the aggregate expenditure (AE)function shifts

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.Other things being equal,exogenous changes in the price level will cause

Consider the nature of macroeconomic equilibrium.If,at a particular price level,the total output demanded is greater than that supplied by producers,then

Which of the following could cause a leftward shift in the aggregate demand (AD)curve?

Consider the basic AD/AS model.If major labour unions succeed in increasing wages across the economy,the AS curve will shift

Consider the AD/AS model.An increase in government purchases will have no impact on equilibrium real GDP if

If the economy is in macroeconomic equilibrium with a vertical AS curve,and then aggregate demand increases,we expect the AE function to shift to a

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

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.Other things being equal,exogenous changes in the price level will cause