Question 1

A recessionary gap is the amount by which

Accepted Answer

A) the price level must adjust to achieve full employment. 
B) potential GDP exceeds real GDP. 
C) real GDP exceeds potential GDP. 
D) potential GDP must increase to achieve full employment at a given price level. 
E) aggregate demand will increase to achieve full employment at a given price level. 
A) the price level must adjust to achieve full employment. 
B) potential GDP exceeds real GDP. 
C) real GDP exceeds potential GDP. 
D) potential GDP must increase to achieve full employment at a given price level. 
E) aggregate demand will increase to achieve full employment at a given price level.

Question 2

Use the figure below to answer the following questions.
   Figure 10.3.5
-Refer to Figure 10.3.5.Potential GDP is

Accepted Answer

A) more than $13 trillion and less than $13.5 trillion. 
B) less than $13 trillion. 
C) $13 trillion. 
D) 100 
E) $13.5 trillion. 
A) more than $13 trillion and less than $13.5 trillion. 
B) less than $13 trillion. 
C) $13 trillion. 
D) 100 
E) $13.5 trillion.

Question 3

Which of the following statements about the monetarist view of the macroeconomy is incorrect?

Accepted Answer

A) Left alone, the economy rarely operates at full employment. 
B) All recessions result from inappropriate monetary policy. 
C) The money wage rate is sticky. 
D) Taxes should be kept low to avoid disincentive effects that decrease potential GDP. 
E) Provided that the quantity of money is kept on a steady growth path, no active stabilization is needed to offset changes in aggregate demand. 
A) Left alone, the economy rarely operates at full employment. 
B) All recessions result from inappropriate monetary policy. 
C) The money wage rate is sticky. 
D) Taxes should be kept low to avoid disincentive effects that decrease potential GDP. 
E) Provided that the quantity of money is kept on a steady growth path, no active stabilization is needed to offset changes in aggregate demand.

Question 4

Canada's exports to the European Union boom.What is the effect on the quantity of real GDP demanded or aggregate demand in Canada?

Accepted Answer

A) The quantity of Canadian real GDP demanded increases. 
B) The quantity of Canadian real GDP demanded decreases. 
C) Canadian aggregate demand increases. 
D) Canadian aggregate demand decreases. 
E) There is no change to either the quantity of Canadian real GDP demanded or to Canadian aggregate demand. 
A) The quantity of Canadian real GDP demanded increases. 
B) The quantity of Canadian real GDP demanded decreases. 
C) Canadian aggregate demand increases. 
D) Canadian aggregate demand decreases. 
E) There is no change to either the quantity of Canadian real GDP demanded or to Canadian aggregate demand.

Question 5

Use the figure below to answer the following questions.
   Figure 10.2.1
-Refer to Figure 10.2.1.Which graph illustrates the effect of an increase in the quantity of money?

Accepted Answer

A) a only 
B) b only 
C) c only 
D) d only 
E) Both b and c 
A) a only 
B) b only 
C) c only 
D) d only 
E) Both b and c

Question 6

Use the figure below to answer the following questions.
   Figure 10.3.5
-Refer to Figure 10.3.5.When the economy is at full employment, real GDP is

Accepted Answer

A) 100. 
B) $13.5 trillion. 
C) $13 trillion. 
D) more than $13 trillion and less than $13.5 trillion. 
E) less than $13 trillion. 
A) 100. 
B) $13.5 trillion. 
C) $13 trillion. 
D) more than $13 trillion and less than $13.5 trillion. 
E) less than $13 trillion.

Question 7

Use the figure below to answer the following questions.
   Figure 10.3.1
-Refer to Figure 10.3.1.Short- run macroeconomic equilibrium real GDP is

Accepted Answer

A) $480 billion. 
B) $520 billion. 
C) $400 billion. 
D) $360 billion. 
E) $440 billion. 
A) $480 billion. 
B) $520 billion. 
C) $400 billion. 
D) $360 billion. 
E) $440 billion.

Question 8

Which one of the following newspaper quotations describes a rightward shift of the LAS curve?

Accepted Answer

A) "The recent tornadoes destroyed many factories in Calgary and Edmonton." 
B) "Growth has been unusually high the last few years due to more women entering the work force." 
C) "The decrease in consumer spending may lead to a recession." 
D) "Recent higher wage settlements are expected to cause higher inflation this year." 
E) "The increase in consumer spending is expected to lead to inflation, without any increase in real GDP." 
A) "The recent tornadoes destroyed many factories in Calgary and Edmonton." 
B) "Growth has been unusually high the last few years due to more women entering the work force." 
C) "The decrease in consumer spending may lead to a recession." 
D) "Recent higher wage settlements are expected to cause higher inflation this year." 
E) "The increase in consumer spending is expected to lead to inflation, without any increase in real GDP."

Question 9

Which one of the following newspaper quotations describes a movement along an LAS curve?

Accepted Answer

A) "The increase in consumer spending is expected to lead to inflation, without any increase in real GDP." 
B) "The decrease in consumer spending may lead to a recession." 
C) "The recent tornadoes destroyed many factories in Calgary and Edmonton." 
D) "Growth has been unusually high the last few years due to more women entering the labour force." 
E) "Recent higher wage settlements are expected to cause higher inflation this year." 
A) "The increase in consumer spending is expected to lead to inflation, without any increase in real GDP." 
B) "The decrease in consumer spending may lead to a recession." 
C) "The recent tornadoes destroyed many factories in Calgary and Edmonton." 
D) "Growth has been unusually high the last few years due to more women entering the labour force." 
E) "Recent higher wage settlements are expected to cause higher inflation this year."

Question 10

Use the figure below to answer the following questions.
   Figure 10.3.5
-Refer to Figure 10.3.5.The shift of the aggregate demand curve from AD0 to AD1 might have been the result of

Accepted Answer

A) an increase in government expenditure. 
B) a rise in the foreign exchange rate 
C) an increase in taxes. 
D) a decrease in the quantity of money. 
E) none of the above. 
A) an increase in government expenditure. 
B) a rise in the foreign exchange rate 
C) an increase in taxes. 
D) a decrease in the quantity of money. 
E) none of the above.

Question 11

We observe an increase in the price level and a decrease in real GDP.Which of the following is a possible explanation?

Accepted Answer

A) an increase in the quantity of money 
B) an increase in expected future profits 
C) an increase in factor prices 
D) an increase in expected future income 
E) an increase in the quantity of capital 
A) an increase in the quantity of money 
B) an increase in expected future profits 
C) an increase in factor prices 
D) an increase in expected future income 
E) an increase in the quantity of capital

Question 12

When an economy is operating on its long- run aggregate supply curve,

Accepted Answer

A) the actual unemployment rate equals the natural unemployment rate. 
B) real GDP demanded exceeds real GDP supplied. 
C) the actual inflation rate is greater than the expected inflation rate. 
D) the unemployment rate is less than the natural unemployment rate. 
E) inflation must be positive. 
A) the actual unemployment rate equals the natural unemployment rate. 
B) real GDP demanded exceeds real GDP supplied. 
C) the actual inflation rate is greater than the expected inflation rate. 
D) the unemployment rate is less than the natural unemployment rate. 
E) inflation must be positive.

Question 13

Use the table below to answer the following questions.
Table 10.3.1
  
-Refer to Table 10.3.1.The economy eventually moves to its long- run equilibrium.In long- run equilibrium, the price level is _______ and real GDP is _______ billion.

Accepted Answer

A) 130; $500 
B) 125; $550 
C) 120; $500 
D) 120; $600 
E) 130; $600 
A) 130; $500 
B) 125; $550 
C) 120; $500 
D) 120; $600 
E) 130; $600

Question 14

Potential GDP

Accepted Answer

A) does not vary with the price level. 
B) is the level of real GDP when unemployment is zero. 
C) increases as the quantity of money in the economy increases. 
D) never changes. 
E) increases as the price level rises. 
A) does not vary with the price level. 
B) is the level of real GDP when unemployment is zero. 
C) increases as the quantity of money in the economy increases. 
D) never changes. 
E) increases as the price level rises.

Question 15

All of the following will raise the price level except

Accepted Answer

A) aggregate demand increases and short- run aggregate supply decreases. 
B) an increase in the quantity of money. 
C) aggregate demand increases. 
D) short- run aggregate supply decreases. 
E) an increase in the quantity of capital. 
A) aggregate demand increases and short- run aggregate supply decreases. 
B) an increase in the quantity of money. 
C) aggregate demand increases. 
D) short- run aggregate supply decreases. 
E) an increase in the quantity of capital.

Question 16

The world goes into an expansion.This event

Accepted Answer

A) increases Canada's short- run aggregate supply. 
B) decreases Canada's aggregate demand and decreases Canada's short- run aggregate supply. 
C) decreases Canada's aggregate demand. 
D) increases Canada's aggregate demand. 
E) increases Canada's long- run aggregate supply. 
A) increases Canada's short- run aggregate supply. 
B) decreases Canada's aggregate demand and decreases Canada's short- run aggregate supply. 
C) decreases Canada's aggregate demand. 
D) increases Canada's aggregate demand. 
E) increases Canada's long- run aggregate supply.

Question 17

Aggregate demand is the relationship between

Accepted Answer

A) the price level and nominal GDP. 
B) real aggregate expenditure and real GDP. 
C) the price level and the quantity of real GDP demanded. 
D) real income and real GDP. 
E) real prices and real GDP. 
A) the price level and nominal GDP. 
B) real aggregate expenditure and real GDP. 
C) the price level and the quantity of real GDP demanded. 
D) real income and real GDP. 
E) real prices and real GDP.

Question 18

If real GDP is less than potential GDP, then the economy is

Accepted Answer

A) in a full- employment equilibrium. 
B) in a below full- employment equilibrium. 
C) in a long- run equilibrium. 
D) not in a short- run equilibrium. 
E) in an above full- employment equilibrium. 
A) in a full- employment equilibrium. 
B) in a below full- employment equilibrium. 
C) in a long- run equilibrium. 
D) not in a short- run equilibrium. 
E) in an above full- employment equilibrium.

Question 19

Use the figure below to answer the following questions.
   Figure 10.3.5
-Refer to Figure 10.3.5.At point B the economy has

Accepted Answer

A) a recessionary gap with real GDP in excess of potential GDP. 
B) a recessionary gap with real GDP less than potential GDP. 
C) an inflationary gap with real GDP less than potential GDP. 
D) an inflationary gap with real GDP in excess of potential GDP. 
E) neither an inflationary gap nor a recessionary gap. 
A) a recessionary gap with real GDP in excess of potential GDP. 
B) a recessionary gap with real GDP less than potential GDP. 
C) an inflationary gap with real GDP less than potential GDP. 
D) an inflationary gap with real GDP in excess of potential GDP. 
E) neither an inflationary gap nor a recessionary gap.

Question 20

Long- run aggregate supply will increase for all of the following reasons except

Accepted Answer

A) a fall in the money wage rate. 
B) an increase in the quantity of capital. 
C) an increase in human capital. 
D) the introduction of new technology. 
E) an increase in the full- employment quantity of labour. 
A) a fall in the money wage rate. 
B) an increase in the quantity of capital. 
C) an increase in human capital. 
D) the introduction of new technology. 
E) an increase in the full- employment quantity of labour.

A recessionary gap is the amount by which

Use the figure below to answer the following questions. Figure 10.3.5 -Refer to Figure 10.3.5.Potential GDP is

Which of the following statements about the monetarist view of the macroeconomy is incorrect?

Canada's exports to the European Union boom.What is the effect on the quantity of real GDP demanded or aggregate demand in Canada?

Use the figure below to answer the following questions. Figure 10.2.1 -Refer to Figure 10.2.1.Which graph illustrates the effect of an increase in the quantity of money?

Use the figure below to answer the following questions. Figure 10.3.5 -Refer to Figure 10.3.5.When the economy is at full employment, real GDP is

Use the figure below to answer the following questions. Figure 10.3.1 -Refer to Figure 10.3.1.Short- run macroeconomic equilibrium real GDP is

Which one of the following newspaper quotations describes a rightward shift of the LAS curve?

Which one of the following newspaper quotations describes a movement along an LAS curve?

Use the figure below to answer the following questions. Figure 10.3.5 -Refer to Figure 10.3.5.The shift of the aggregate demand curve from AD₀to AD₁might have been the result of

We observe an increase in the price level and a decrease in real GDP.Which of the following is a possible explanation?

When an economy is operating on its long- run aggregate supply curve,

Use the table below to answer the following questions. Table 10.3.1 -Refer to Table 10.3.1.The economy eventually moves to its long- run equilibrium.In long- run equilibrium, the price level is _ and real GDP is _ billion.

Potential GDP

All of the following will raise the price level except

The world goes into an expansion.This event

Aggregate demand is the relationship between

If real GDP is less than potential GDP, then the economy is

Use the figure below to answer the following questions. Figure 10.3.5 -Refer to Figure 10.3.5.At point B the economy has

Long- run aggregate supply will increase for all of the following reasons except

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Expenditure Multipliers

The Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

Exam 10: Aggregate Supply and Aggregate Demand

A recessionary gap is the amount by which

Use the figure below to answer the following questions. Figure 10.3.5 -Refer to Figure 10.3.5.Potential GDP is

Which of the following statements about the monetarist view of the macroeconomy is incorrect?

Canada's exports to the European Union boom.What is the effect on the quantity of real GDP demanded or aggregate demand in Canada?

Use the figure below to answer the following questions. Figure 10.2.1 -Refer to Figure 10.2.1.Which graph illustrates the effect of an increase in the quantity of money?

Use the figure below to answer the following questions. Figure 10.3.5 -Refer to Figure 10.3.5.When the economy is at full employment, real GDP is

Use the figure below to answer the following questions. Figure 10.3.1 -Refer to Figure 10.3.1.Short- run macroeconomic equilibrium real GDP is

Which one of the following newspaper quotations describes a rightward shift of the LAS curve?

Which one of the following newspaper quotations describes a movement along an LAS curve?

Use the figure below to answer the following questions. Figure 10.3.5 -Refer to Figure 10.3.5.The shift of the aggregate demand curve from AD0 to AD1 might have been the result of

We observe an increase in the price level and a decrease in real GDP.Which of the following is a possible explanation?

When an economy is operating on its long- run aggregate supply curve,

Use the table below to answer the following questions. Table 10.3.1 -Refer to Table 10.3.1.The economy eventually moves to its long- run equilibrium.In long- run equilibrium, the price level is _______ and real GDP is _______ billion.

Potential GDP

All of the following will raise the price level except

The world goes into an expansion.This event

Aggregate demand is the relationship between

If real GDP is less than potential GDP, then the economy is

Use the figure below to answer the following questions. Figure 10.3.5 -Refer to Figure 10.3.5.At point B the economy has

Long- run aggregate supply will increase for all of the following reasons except

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Expenditure Multipliers

The Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

Use the figure below to answer the following questions. Figure 10.3.5 -Refer to Figure 10.3.5.The shift of the aggregate demand curve from AD₀to AD₁might have been the result of

Use the table below to answer the following questions. Table 10.3.1 -Refer to Table 10.3.1.The economy eventually moves to its long- run equilibrium.In long- run equilibrium, the price level is _ and real GDP is _ billion.