Question 1

Which of the following will cause a positive aggregate supply shock?

Accepted Answer

A) an increase in the price of raw materials 
B) a decrease in the price of foreign output 
C) an increase in the price of foreign output 
D) a decrease in the price of oil 
E) a decrease in productivity 
A) an increase in the price of raw materials 
B) a decrease in the price of foreign output 
C) an increase in the price of foreign output 
D) a decrease in the price of oil 
E) a decrease in productivity

Question 2

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

Accepted Answer

A) no effect on the level of desired real expenditure. 
B) an increase in the level of desired real expenditure. 
C) a decrease in desired real expenditure only if it is accompanied by a change in the current income of households. 
D) a decrease in desired real expenditure because it will affect the real value of wealth. 
E) an increase in net exports. 
A) no effect on the level of desired real expenditure. 
B) an increase in the level of desired real expenditure. 
C) a decrease in desired real expenditure only if it is accompanied by a change in the current income of households. 
D) a decrease in desired real expenditure because it will affect the real value of wealth. 
E) an increase in net exports.

Question 3

Consider the following news headline: "World commodity prices rise sharply." Choose the statement below that best describes the likely macroeconomic effects in Canada.(Remember that Canada is both a producer and a consumer of commodities.)

Accepted Answer

A) There is no change in either the AD or the AS curves. 
B) 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. 
C) The AD and AS curves both shift to the left; the effect on the price level is indeterminate and real GDP decreases. 
D) The AD and AS curves both shift to the right; the effect on the price level is indeterminate and real GDP increases. 
E) 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. 
A) There is no change in either the AD or the AS curves. 
B) 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. 
C) The AD and AS curves both shift to the left; the effect on the price level is indeterminate and real GDP decreases. 
D) The AD and AS curves both shift to the right; the effect on the price level is indeterminate and real GDP increases. 
E) 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.

Question 4

Consider the basic AD/AS model with an upward-sloping AS curve.A positive aggregate demand shock will initially cause

Accepted Answer

A) a decrease in the price level. 
B) the equilibrium point to move rightward along the AS curve. 
C) a movement along the AD curve to the right. 
D) a shift to the right in the AS curve. 
E) the unemployment rate to remain constant. 
A) a decrease in the price level. 
B) the equilibrium point to move rightward along the AS curve. 
C) a movement along the AD curve to the right. 
D) a shift to the right in the AS curve. 
E) the unemployment rate to remain constant.

Question 5

Consider the basic AD/AS model.A rise in an input price like the wage rate would be expected to create a new macroeconomic equilibrium,which in comparison to the original equilibrium,has a price level that is

Accepted Answer

A) higher and a real GDP that is higher. 
B) higher and a real GDP that is lower. 
C) higher and a real GDP that is the same. 
D) lower and a real GDP that is higher. 
E) lower and a real GDP that is lower. 
A) higher and a real GDP that is higher. 
B) higher and a real GDP that is lower. 
C) higher and a real GDP that is the same. 
D) lower and a real GDP that is higher. 
E) lower and a real GDP that is lower.

Question 6

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

Accepted Answer

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

Question 7

Aggregate supply refers to the

Accepted Answer

A) decisions of firms to decrease inputs in order to produce outputs. 
B) effects of increases in input prices on output. 
C) economy's potential output at each possible labour force. 
D) supply of labour inputs in the economy. 
E) total output of goods and services that firms would like to produce and sell. 
A) decisions of firms to decrease inputs in order to produce outputs. 
B) effects of increases in input prices on output. 
C) economy's potential output at each possible labour force. 
D) supply of labour inputs in the economy. 
E) total output of goods and services that firms would like to produce and sell.

Question 8

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

Accepted Answer

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

Question 9

Consider a simple macro model with a given price level and demand-determined output.An exogenous change in the domestic price level changes equilibrium real GDP

Accepted Answer

A) in the same direction. 
B) in the opposite direction. 
C) by the same amount in the same direction. 
D) by the same amount in the opposite direction. 
E) by a lesser amount in either direction. 
A) in the same direction. 
B) in the opposite direction. 
C) by the same amount in the same direction. 
D) by the same amount in the opposite direction. 
E) by a lesser amount in either direction.

Question 10

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

Accepted Answer

A) an increase in induced imports 
B) an increase in desired investment 
C) an increase in the net tax rate 
D) an increase in desired saving 
E) an increase in the price level 
A) an increase in induced imports 
B) an increase in desired investment 
C) an increase in the net tax rate 
D) an increase in desired saving 
E) an increase in the price level

Question 11

Suppose the government embarks on an infrastructure program,spending $8 billion on the construction of new roads and bridges.What is the size of the multiplier if the AS curve is vertical?

Accepted Answer

A) 0 
B) greater than 1 
C) less than 1 
D) infinity 
E) insufficient information to solve 
A) 0 
B) greater than 1 
C) less than 1 
D) infinity 
E) insufficient information to solve

Question 12

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

Accepted Answer

A) a decrease 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) a decrease 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 13

The economy's aggregate supply curve is drawn under two main assumptions.They are

Accepted Answer

A) firms' unit costs are constant; prices of all factors of production are constant. 
B) firms' unit costs are constant; the state of technology is constant. 
C) firms will produce more output only if prices rise; technology improves only if prices rise. 
D) the prices of all factors of production are constant; the state of technology is constant. 
E) the prices of all factors of production are constant; productivity improves as the price level rises. 
A) firms' unit costs are constant; prices of all factors of production are constant. 
B) firms' unit costs are constant; the state of technology is constant. 
C) firms will produce more output only if prices rise; technology improves only if prices rise. 
D) the prices of all factors of production are constant; the state of technology is constant. 
E) the prices of all factors of production are constant; productivity improves as the price level rises.

Question 14

FIGURE 23-3 Refer to Figure 23-3.Which of the following statements best describes the supply side of Economy A in its current equilibrium position?

Accepted Answer

A) Unit costs are rising,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) Unit costs are rising,but firms are able to produce more output with no increase in the price level because there is excess capacity in the economy. 
A) Unit costs are rising,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) Unit costs are rising,but firms are able to produce more output with no increase in the price level because there is excess capacity in the economy.

Question 15

Consider the basic AD/AS model.Real GDP is demand determined along the

Accepted Answer

A) upward-sloping portion of the AS curve. 
B) downward-sloping portion of the AS curve. 
C) vertical portion of the AS curve. 
D) horizontal portion of the AS curve. 
E) None of the above - real GDP cannot be demand determined. 
A) upward-sloping portion of the AS curve. 
B) downward-sloping portion of the AS curve. 
C) vertical portion of the AS curve. 
D) horizontal portion of the AS curve. 
E) None of the above - real GDP cannot be demand determined.

Question 16

The concept of "demand-determined output" requires ________ to remain constant as output increases.

Accepted Answer

A) technology of production 
B) government purchases 
C) firms' unit costs 
D) labour productivity 
E) the ratio of price setters to price takers 
A) technology of production 
B) government purchases 
C) firms' unit costs 
D) labour productivity 
E) the ratio of price setters to price takers

Question 17

Which of the following will cause a negative aggregate demand shock?

Accepted Answer

A) an increase in the price of raw materials 
B) a decrease in the domestic price level 
C) an increase in the domestic price level 
D) an increase in government expenditures 
E) an increase in tax rates 
A) an increase in the price of raw materials 
B) a decrease in the domestic price level 
C) an increase in the domestic price level 
D) an increase in government expenditures 
E) an increase in tax rates

Question 18

Consider the basic AD/AS model with an upward-sloping AS curve.A positive aggregate demand shock will result in

Accepted Answer

A) an increase in prices but not output. 
B) an increase in output but not prices. 
C) an increase in both output and prices. 
D) a decrease in both output and prices. 
E) a decrease in output and an increase in prices. 
A) an increase in prices but not output. 
B) an increase in output but not prices. 
C) an increase in both output and prices. 
D) a decrease in both output and prices. 
E) a decrease in output and an increase in prices.

Question 19

Consider the simple multiplier when the price level is constant.We can say that national income is ________ and that the simple multiplier measures the horizontal shift in ________ in response to a change in autonomous desired expenditure.

Accepted Answer

A) demand determined; the AS curve 
B) unit-cost determined; the AD curve 
C) constant; the AD curve 
D) demand determined; the AD curve 
E) constant; the AE curve 
A) demand determined; the AS curve 
B) unit-cost determined; the AD curve 
C) constant; the AD curve 
D) demand determined; the AD curve 
E) constant; the AE curve

Question 20

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

Accepted Answer

A) down and the economy will move upward to the left along the AD curve. 
B) down and the economy will move downward to the right along the AD curve. 
C) upward and the economy moves upward to the left along the AD curve. 
D) upward and the economy moves downward to the right along the AD curve. 
E) to the right and the AD curve will also shift to the right. 
A) down and the economy will move upward to the left along the AD curve. 
B) down and the economy will move downward to the right along the AD curve. 
C) upward and the economy moves upward to the left along the AD curve. 
D) upward and the economy moves downward to the right along the AD curve. 
E) to the right and the AD curve will also shift to the right.

Which of the following will cause a positive aggregate supply shock?

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

Consider the following news headline: "World commodity prices rise sharply." Choose the statement below that best describes the likely macroeconomic effects in Canada.(Remember that Canada is both a producer and a consumer of commodities.)

Consider the basic AD/AS model with an upward-sloping AS curve.A positive aggregate demand shock will initially cause

Consider the basic AD/AS model.A rise in an input price like the wage rate would be expected to create a new macroeconomic equilibrium,which in comparison to the original equilibrium,has a price level that is

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

Aggregate supply refers to the

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

Consider a simple macro model with a given price level and demand-determined output.An exogenous change in the domestic price level changes equilibrium real GDP

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

Suppose the government embarks on an infrastructure program,spending $8 billion on the construction of new roads and bridges.What is the size of the multiplier if the AS curve is vertical?

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

The economy's aggregate supply curve is drawn under two main assumptions.They are

FIGURE 23-3 Refer to Figure 23-3.Which of the following statements best describes the supply side of Economy A in its current equilibrium position?

Consider the basic AD/AS model.Real GDP is demand determined along the

The concept of "demand-determined output" requires ________ to remain constant as output increases.

Which of the following will cause a negative aggregate demand shock?

Consider the basic AD/AS model with an upward-sloping AS curve.A positive aggregate demand shock will result in

Consider the simple multiplier when the price level is constant.We can say that national income is and that the simple multiplier measures the horizontal shift in in response to a change in autonomous desired expenditure.

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

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

Which of the following will cause a positive aggregate supply shock?

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

Consider the following news headline: "World commodity prices rise sharply." Choose the statement below that best describes the likely macroeconomic effects in Canada.(Remember that Canada is both a producer and a consumer of commodities.)

Consider the basic AD/AS model with an upward-sloping AS curve.A positive aggregate demand shock will initially cause

Consider the basic AD/AS model.A rise in an input price like the wage rate would be expected to create a new macroeconomic equilibrium,which in comparison to the original equilibrium,has a price level that is

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

Aggregate supply refers to the

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

Consider a simple macro model with a given price level and demand-determined output.An exogenous change in the domestic price level changes equilibrium real GDP

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

Suppose the government embarks on an infrastructure program,spending $8 billion on the construction of new roads and bridges.What is the size of the multiplier if the AS curve is vertical?

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

The economy's aggregate supply curve is drawn under two main assumptions.They are

FIGURE 23-3 Refer to Figure 23-3.Which of the following statements best describes the supply side of Economy A in its current equilibrium position?

Consider the basic AD/AS model.Real GDP is demand determined along the

The concept of "demand-determined output" requires ________ to remain constant as output increases.

Which of the following will cause a negative aggregate demand shock?

Consider the basic AD/AS model with an upward-sloping AS curve.A positive aggregate demand shock will result in

Consider the simple multiplier when the price level is constant.We can say that national income is ________ and that the simple multiplier measures the horizontal shift in ________ in response to a change in autonomous desired expenditure.

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

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 the simple multiplier when the price level is constant.We can say that national income is and that the simple multiplier measures the horizontal shift in in response to a change in autonomous desired expenditure.