Question 1

FIGURE 23-3 Refer to Figure 23-3.Suppose the price level in Economy A is above   .Which of the following statements describes what would occur?

Accepted Answer

A) The AD curve would shift to the right until macro equilibrium is reached. 
B) Real GDP would be below its equilibrium level which would put downward pressure on the price level until it reaches macro equilibrium at   . 
C) The amount of output supplied by firms is greater than total desired expenditure; excess supply will put downward pressure on the price level until it reaches macro equilibrium at   . 
D) Real GDP would be below its equilibrium level which would put upward pressure on the price level until it reaches macro equilibrium. 
E) The AS curve would shift to the left until macro equilibrium is reached. 
A) The AD curve would shift to the right until macro equilibrium is reached. 
B) Real GDP would be below its equilibrium level which would put downward pressure on the price level until it reaches macro equilibrium at   . 
C) The amount of output supplied by firms is greater than total desired expenditure; excess supply will put downward pressure on the price level until it reaches macro equilibrium at   . 
D) Real GDP would be below its equilibrium level which would put upward pressure on the price level until it reaches macro equilibrium. 
E) The AS curve would shift to the left until macro equilibrium is reached.

Question 2

The economy's aggregate supply (AS)curve shows the relationship between the price level and the total

Accepted Answer

A) investment that firms wish to make,with input prices given. 
B) investment that firms wish to make,as input prices vary. 
C) output that firms wish to produce and sell,with input prices given. 
D) output that firms wish to produce and sell,as input prices vary. 
E) wealth accumulated by households,with national income given. 
A) investment that firms wish to make,with input prices given. 
B) investment that firms wish to make,as input prices vary. 
C) output that firms wish to produce and sell,with input prices given. 
D) output that firms wish to produce and sell,as input prices vary. 
E) wealth accumulated by households,with national income given.

Question 3

Other things being equal,a rise in the price level will imply ________ in wealth for the bondholder and ________ in the wealth of the issuer of the bond.

Accepted Answer

A) a decline; an increase 
B) a decline; a decline 
C) a decline; no change 
D) an increase; a decline 
E) an increase; an increase 
A) a decline; an increase 
B) a decline; a decline 
C) a decline; no change 
D) an increase; a decline 
E) an increase; an increase

Question 4

Consider the basic AD/AS model.Suppose that a rising percentage of high-school graduates are illiterate,resulting in a decrease in average labour productivity.This change will

Accepted Answer

A) shift the AD curve to the left. 
B) shift the AD curve to the right. 
C) shift the AS curve to the left. 
D) shift the AS curve to the right. 
E) cause a movement to the right along the AS curve. 
A) shift the AD curve to the left. 
B) shift the AD curve to the right. 
C) shift the AS curve to the left. 
D) shift the AS curve to the right. 
E) cause a movement to the right along the AS curve.

Question 5

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

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 6

An aggregate demand (AD)shock will have a small effect on real GDP and a large effect on the price level when

Accepted Answer

A) the AS curve is steep. 
B) the AD curve intersects the AS curve on the downward-sloping portion of the AS curve. 
C) the AS curve is close to horizontal. 
D) the AD curve is steep. 
E) the AD curve is flat. 
A) the AS curve is steep. 
B) the AD curve intersects the AS curve on the downward-sloping portion of the AS curve. 
C) the AS curve is close to horizontal. 
D) the AD curve is steep. 
E) the AD curve is flat.

Question 7

FIGURE 23-3 Refer to Figure 23-3.Which of the two economies,A or B,will experience more volatile fluctuations in national income in response to aggregate demand shocks?

Accepted Answer

A) Economies A and B will experience similar volatility because the slopes of the AD curves are the same. 
B) Economy A because the large fluctuations in the price level lead to large fluctuations in national income. 
C) Economy A because the multiplier is much larger than in Economy B. 
D) Economy B because the multiplier is much smaller than in Economy A. 
E) Economy B because output is purely demand determined,and there is no offsetting effect from a price level increase. 
A) Economies A and B will experience similar volatility because the slopes of the AD curves are the same. 
B) Economy A because the large fluctuations in the price level lead to large fluctuations in national income. 
C) Economy A because the multiplier is much larger than in Economy B. 
D) Economy B because the multiplier is much smaller than in Economy A. 
E) Economy B because output is purely demand determined,and there is no offsetting effect from a price level increase.

Question 8

Other things being equal,an exogenous increase in the price level causes the aggregate wealth of holders and issuers of private-sector bonds to

Accepted Answer

A) decrease. 
B) increase. 
C) not change since the changes in the wealth of bondholders and bond issuers offset each other. 
D) either increase or decrease depending on other factors. 
E) rise in nominal terms,but fall in real terms. 
A) decrease. 
B) increase. 
C) not change since the changes in the wealth of bondholders and bond issuers offset each other. 
D) either increase or decrease depending on other factors. 
E) rise in nominal terms,but fall in real terms.

Question 9

Suppose firms are currently producing output at a level beyond their normal capacity.In this situation,the AS curve will be relatively ________ and a positive AD shock will result in ________.

Accepted Answer

A) steep; an increase in the price level with a small increase in real GDP 
B) flat; an equal increase in the price level and in real GDP 
C) flat; a very small increase in prices but a large increase in real GDP 
D) flat; a very small decrease in the price level and a decrease in real GDP 
E) steep; a decrease in the price level and a very small decrease in real GDP 
A) steep; an increase in the price level with a small increase in real GDP 
B) flat; an equal increase in the price level and in real GDP 
C) flat; a very small increase in prices but a large increase in real GDP 
D) flat; a very small decrease in the price level and a decrease in real GDP 
E) steep; a decrease in the price level and a very small decrease in real GDP

Question 10

Which of the following is implied by a leftward shift in the economy's AS curve?

Accepted Answer

A) There is an increase in aggregate supply. 
B) There is a demand shock. 
C) At any given price level,a lower level of output will be supplied. 
D) At any given price level,a higher level of output will be supplied. 
E) The same output will be produced in equilibrium,but at a lower price level. 
A) There is an increase in aggregate supply. 
B) There is a demand shock. 
C) At any given price level,a lower level of output will be supplied. 
D) At any given price level,a higher level of output will be supplied. 
E) The same output will be produced in equilibrium,but at a lower price level.

Question 11

Consider the basic AD/AS model.If their unit costs rise as output increases,price-taking firms will be prepared to produce ________ only if ________.

Accepted Answer

A) more; prices decrease 
B) more; the economy is in equilibrium 
C) their current output; prices increase 
D) less; prices increase 
E) more; prices increase 
A) more; prices decrease 
B) more; the economy is in equilibrium 
C) their current output; prices increase 
D) less; prices increase 
E) more; prices increase

Question 12

Consider the relationship between the AE curve and the AD curve.A rise in the amount of desired investment expenditure at each level of national income

Accepted Answer

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

Question 13

Consider the AD curve in the simple macro model.The simple multiplier is reflected by the

Accepted Answer

A) horizontal distance between initial macroeconomic equilibrium and the new intersection of the AD and AE curves in response to a change in autonomous expenditure. 
B) downward movement along the AD curve in response to a change in autonomous expenditure. 
C) size of the rightward shift of the AD curve in response to a change in autonomous expenditure. 
D) upward movement along the AD curve in response to a change in autonomous expenditure. 
E) size of the leftward shift of the AD curve in response to a rise in autonomous expenditure. 
A) horizontal distance between initial macroeconomic equilibrium and the new intersection of the AD and AE curves in response to a change in autonomous expenditure. 
B) downward movement along the AD curve in response to a change in autonomous expenditure. 
C) size of the rightward shift of the AD curve in response to a change in autonomous expenditure. 
D) upward movement along the AD curve in response to a change in autonomous expenditure. 
E) size of the leftward shift of the AD curve in response to a rise in autonomous expenditure.

Question 14

Other things being equal,a higher marginal propensity to spend will lead to a ________ AD curve.

Accepted Answer

A) flatter 
B) steeper 
C) rightward shift of the 
D) leftward shift of the 
A) flatter 
B) steeper 
C) rightward shift of the 
D) leftward shift of the

Question 15

If the economy is in macroeconomic equilibrium with a vertical AS curve,and then aggregate demand decreases,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 falls. 
C) higher level but then return to its original position as the price level falls. 
D) lower level and stay there. 
E) lower level,but then return to its original position as the price level falls. 
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 falls. 
C) higher level but then return to its original position as the price level falls. 
D) lower level and stay there. 
E) lower level,but then return to its original position as the price level falls.

Question 16

In a macro model with a constant price level,an increase in government purchases will cause the AE curve to shift

Accepted Answer

A) downward and the AD curve to shift to the right. 
B) downward and the AD curve to shift to the left. 
C) downward and a movement to the right along the AD curve. 
D) upward and the AD curve to shift to the left. 
E) upward and the AD curve to shift to the right. 
A) downward and the AD curve to shift to the right. 
B) downward and the AD curve to shift to the left. 
C) downward and a movement to the right along the AD curve. 
D) upward and the AD curve to shift to the left. 
E) upward and the AD curve to shift to the right.

Question 17

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

Accepted Answer

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

Question 18

Consider a simple macro model with demand-determined output.Other things being equal,the price level and desired aggregate expenditure are related to each other

Accepted Answer

A) positively. 
B) proportionally. 
C) progressively. 
D) exponentially. 
E) negatively. 
A) positively. 
B) proportionally. 
C) progressively. 
D) exponentially. 
E) negatively.

Question 19

When the economy's AS curve is positively sloped,the multiplier in the AD/AS model is

Accepted Answer

A) constant. 
B) equal to one. 
C) equal to the simple multiplier. 
D) smaller than the simple multiplier. 
E) larger than the simple multiplier. 
A) constant. 
B) equal to one. 
C) equal to the simple multiplier. 
D) smaller than the simple multiplier. 
E) larger than the simple multiplier.

Question 20

FIGURE 23-5 Refer to Figure 23-5.Suppose that an increase in government purchases caused the AD curve to shift to the right,as shown.If the simple multiplier in this model is 4,then what is the value of the multiplier?

Accepted Answer

A) 1.2 
B) 1.4 
C) 4 
D) 2.8 
E) 3.2 
A) 1.2 
B) 1.4 
C) 4 
D) 2.8 
E) 3.2

FIGURE 23-3 Refer to Figure 23-3.Suppose the price level in Economy A is above .Which of the following statements describes what would occur?

The economy's aggregate supply (AS)curve shows the relationship between the price level and the total

Other things being equal,a rise in the price level will imply in wealth for the bondholder and in the wealth of the issuer of the bond.

Consider the basic AD/AS model.Suppose that a rising percentage of high-school graduates are illiterate,resulting in a decrease in average labour productivity.This change will

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

An aggregate demand (AD)shock will have a small effect on real GDP and a large effect on the price level when

FIGURE 23-3 Refer to Figure 23-3.Which of the two economies,A or B,will experience more volatile fluctuations in national income in response to aggregate demand shocks?

Other things being equal,an exogenous increase in the price level causes the aggregate wealth of holders and issuers of private-sector bonds to

Suppose firms are currently producing output at a level beyond their normal capacity.In this situation,the AS curve will be relatively and a positive AD shock will result in .

Which of the following is implied by a leftward shift in the economy's AS curve?

Consider the basic AD/AS model.If their unit costs rise as output increases,price-taking firms will be prepared to produce only if .

Consider the relationship between the AE curve and the AD curve.A rise in the amount of desired investment expenditure at each level of national income

Consider the AD curve in the simple macro model.The simple multiplier is reflected by the

Other things being equal,a higher marginal propensity to spend will lead to a ________ AD curve.

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

In a macro model with a constant price level,an increase in government purchases will cause the AE curve to shift

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.Other things being equal,the price level and desired aggregate expenditure are related to each other

When the economy's AS curve is positively sloped,the multiplier in the AD/AS model is

FIGURE 23-5 Refer to Figure 23-5.Suppose that an increase in government purchases caused the AD curve to shift to the right,as shown.If the simple multiplier in this model is 4,then what is the value of the multiplier?

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

FIGURE 23-3 Refer to Figure 23-3.Suppose the price level in Economy A is above .Which of the following statements describes what would occur?

The economy's aggregate supply (AS)curve shows the relationship between the price level and the total

Other things being equal,a rise in the price level will imply ________ in wealth for the bondholder and ________ in the wealth of the issuer of the bond.

Consider the basic AD/AS model.Suppose that a rising percentage of high-school graduates are illiterate,resulting in a decrease in average labour productivity.This change will

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

An aggregate demand (AD)shock will have a small effect on real GDP and a large effect on the price level when

FIGURE 23-3 Refer to Figure 23-3.Which of the two economies,A or B,will experience more volatile fluctuations in national income in response to aggregate demand shocks?

Other things being equal,an exogenous increase in the price level causes the aggregate wealth of holders and issuers of private-sector bonds to

Suppose firms are currently producing output at a level beyond their normal capacity.In this situation,the AS curve will be relatively ________ and a positive AD shock will result in ________.

Which of the following is implied by a leftward shift in the economy's AS curve?

Consider the basic AD/AS model.If their unit costs rise as output increases,price-taking firms will be prepared to produce ________ only if ________.

Consider the relationship between the AE curve and the AD curve.A rise in the amount of desired investment expenditure at each level of national income

Consider the AD curve in the simple macro model.The simple multiplier is reflected by the

Other things being equal,a higher marginal propensity to spend will lead to a ________ AD curve.

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

In a macro model with a constant price level,an increase in government purchases will cause the AE curve to shift

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.Other things being equal,the price level and desired aggregate expenditure are related to each other

When the economy's AS curve is positively sloped,the multiplier in the AD/AS model is

FIGURE 23-5 Refer to Figure 23-5.Suppose that an increase in government purchases caused the AD curve to shift to the right,as shown.If the simple multiplier in this model is 4,then what is the value of the multiplier?

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

Other things being equal,a rise in the price level will imply in wealth for the bondholder and in the wealth of the issuer of the bond.

Suppose firms are currently producing output at a level beyond their normal capacity.In this situation,the AS curve will be relatively and a positive AD shock will result in .

Consider the basic AD/AS model.If their unit costs rise as output increases,price-taking firms will be prepared to produce only if .