Question 1

Cost-push inflation is characterized by a(n):

Accepted Answer

A) increase in aggregate supply and a decrease in aggregate demand. 
B) increase in aggregate demand and no change in aggregate supply. 
C) decrease in aggregate supply and no change in aggregate demand. 
D) decrease in both aggregate supply and aggregate demand. 
A) increase in aggregate supply and a decrease in aggregate demand. 
B) increase in aggregate demand and no change in aggregate supply. 
C) decrease in aggregate supply and no change in aggregate demand. 
D) decrease in both aggregate supply and aggregate demand. C

Question 2

In the long run, the aggregate supply curve of an economy is:

Accepted Answer

A) upward sloping. 
B) downward sloping. 
C) horizontal. 
D) vertical. 
A) upward sloping. 
B) downward sloping. 
C) horizontal. 
D) vertical. D

Question 3

An increase in investment spending caused by a decline in the interest rate will:

Accepted Answer

A) shift the aggregate supply curve to the left. 
B) move the economy up along an existing aggregate demand curve. 
C) shift the aggregate demand curve to the left. 
D) shift the aggregate demand curve to the right. 
A) shift the aggregate supply curve to the left. 
B) move the economy up along an existing aggregate demand curve. 
C) shift the aggregate demand curve to the left. 
D) shift the aggregate demand curve to the right. D

Question 4

Which of the diagrams below best portrays the effects of an increase in consumer spending?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
A) A 
B) B 
C) C 
D) D

Question 5

Suppose the full-employment level of real output (Q) for a hypothetical economy is $500 and that the price level (P) initially is 100.Use the following short-run aggregate supply schedules to answer the next question.   Refer to the information above.In the long run, an increase in the price level from 100 to 125 will:

Accepted Answer

A) increase real output from $500 to $560. 
B) decrease real output from $500 to $440. 
C) change the aggregate supply schedule from (a) to (c) and result in an equilibrium level of real output of $560. 
D) change the aggregate supply schedule from (a) to (b) and result in an equilibrium level of real output of $500. 
A) increase real output from $500 to $560. 
B) decrease real output from $500 to $440. 
C) change the aggregate supply schedule from (a) to (c) and result in an equilibrium level of real output of $560. 
D) change the aggregate supply schedule from (a) to (b) and result in an equilibrium level of real output of $500.

Question 6

A decrease in taxes will cause a(n):

Accepted Answer

A) decrease in the quantity of real domestic output demanded. 
B) increase in the quantity of real domestic output demanded. 
C) increase in aggregate demand. 
D) decrease in aggregate demand. 
A) decrease in the quantity of real domestic output demanded. 
B) increase in the quantity of real domestic output demanded. 
C) increase in aggregate demand. 
D) decrease in aggregate demand.

Question 7

Wage contracts, efficiency wages, and the minimum wage are explanations for why:

Accepted Answer

A) competition results in price wars. 
B) wages tend to be inflexible downward. 
C) the aggregate demand curve slopes downward. 
D) there is little support for the existence of a real-balances effect. 
A) competition results in price wars. 
B) wages tend to be inflexible downward. 
C) the aggregate demand curve slopes downward. 
D) there is little support for the existence of a real-balances effect.

Question 8

Refer to the diagram given below.   Assume that the nominal wages of workers in an economy are initially set on the basis of the price level P2 and that the economy is initially operating at the full-employment level of output Qf.In the long run, an increase in the price level from P2 to P3 will:

Accepted Answer

A) increase the real output from Qf to Q2. 
B) shift the aggregate supply curve from AS2 to AS1. 
C) decrease the real output from Q2 to Q1. 
D) not change the level of real output. 
A) increase the real output from Qf to Q2. 
B) shift the aggregate supply curve from AS2 to AS1. 
C) decrease the real output from Q2 to Q1. 
D) not change the level of real output.

Question 9

Refer to the list below.Which two factors would most likely cause a change in investment spending? The following list of items is related to aggregate demand.Entrepreneurial ability
Consumer expectations
Degree of excess capacity
Personal income tax rates
Productivity
National income abroad
Business taxes
Domestic resource availability
Prices of imported products
Profit expectations on investments

Accepted Answer

A) 2 and 5 
B) 3 and 10 
C) 2 and 7 
D) 6 and 9 
A) 2 and 5 
B) 3 and 10 
C) 2 and 7 
D) 6 and 9

Question 10

If the price level increases in Canada relative to foreign countries, then Canadian consumers will purchase more foreign goods and fewer Canadian goods.This statement describes:

Accepted Answer

A) the output effect. 
B) the foreign trade effect. 
C) the real-balances effect. 
D) the shift-of-spending effect. 
A) the output effect. 
B) the foreign trade effect. 
C) the real-balances effect. 
D) the shift-of-spending effect.

Question 11

Refer to the above diagram.If equilibrium real output is Q2, then:

Accepted Answer

A) aggregate demand is AD1. 
B) the equilibrium price level is P1. 
C) producers will supply output level Q1. 
D) the equilibrium price level is P2. 
A) aggregate demand is AD1. 
B) the equilibrium price level is P1. 
C) producers will supply output level Q1. 
D) the equilibrium price level is P2.

Question 12

The following table is for a particular country in which C is consumption expenditures, Ig is gross investment expenditures, G is government expenditures, X is exports, and M is imports.All figures are in billions of dollars.Each question is independent of the other questions.   Refer to the above table.The wealth or real balances effect of changes in the price level is:

Accepted Answer

A) shown by columns (1) and (2) of the table. 
B) shown by columns (1) and (5) of the table. 
C) shown by columns (1) and (4) of the table. 
D) not shown by the data in the table. 
A) shown by columns (1) and (2) of the table. 
B) shown by columns (1) and (5) of the table. 
C) shown by columns (1) and (4) of the table. 
D) not shown by the data in the table.

Question 13

Aggregate demand decreases and real output falls but the price level remains the same.Which factor most likely contributes to downward price inflexibility?

Accepted Answer

A) the multiplier effect 
B) the wealth effect 
C) fear of price wars 
D) business taxes 
A) the multiplier effect 
B) the wealth effect 
C) fear of price wars 
D) business taxes

Question 14

Refer to the figure given below.   In the above figure, AD1 and AS1 represent the original aggregate demand and aggregate supply curves, respectively.AD2 and AS2 show the new aggregate demand and aggregate supply curves.The change in aggregate supply from AS1 to AS2 could be caused by:

Accepted Answer

A) a reduction in the price level. 
B) an increased availability of entrepreneurial talent. 
C) an increase in business taxes. 
D) the real-balances effect, interest-rate effect, and foreign-trade effect. 
A) a reduction in the price level. 
B) an increased availability of entrepreneurial talent. 
C) an increase in business taxes. 
D) the real-balances effect, interest-rate effect, and foreign-trade effect.

Question 15

The foreign-trade effect causes the aggregate demand curve for an economy to:

Accepted Answer

A) slope downward. 
B) slope upward. 
C) become flatter. 
D) becomes teeper. 
A) slope downward. 
B) slope upward. 
C) become flatter. 
D) becomes teeper.

Question 16

Which of the following statements correctly states the relationship between the per-unit production cost of output and productivity?

Accepted Answer

A) They are exact opposites, with slightly different wording. 
B) They are similar. 
C) They are not related. 
D) They are exactly the same. 
A) They are exact opposites, with slightly different wording. 
B) They are similar. 
C) They are not related. 
D) They are exactly the same.

Question 17

Which of the following would not shift the aggregate supply curve?

Accepted Answer

A) an increase in labour productivity 
B) a decline in the price of imported oil 
C) a decline in business taxes 
D) an increase in the price level 
A) an increase in labour productivity 
B) a decline in the price of imported oil 
C) a decline in business taxes 
D) an increase in the price level

Question 18

Refer to the diagram given below.   Assume that the nominal wages of workers in an economy are initially set on the basis of the price level P2 and that the economy is initially operating at the full-employment level of output Qf.In the short run, an increase in the price level from P2 to P3 will:

Accepted Answer

A) shift the aggregate supply curve from AS2 to AS3. 
B) increase the real output from Q1 to Q2. 
C) shift the aggregate supply curve from AS2 to AS1. 
D) increase the real output from Qf to Q2. 
A) shift the aggregate supply curve from AS2 to AS3. 
B) increase the real output from Q1 to Q2. 
C) shift the aggregate supply curve from AS2 to AS1. 
D) increase the real output from Qf to Q2.

Question 19

An increase in imports (independently of a change in our price level) will increase both aggregate supply and aggregate demand.

Accepted Answer

A) True 
 B)False

Question 20

Which of the above diagrams best portrays the effects of a substantial reduction in government spending?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
A) A 
B) B 
C) C 
D) D

Exam 12: B: Aggregate Demand and Aggregate Supply

Cost-push inflation is characterized by a(n):

In the long run, the aggregate supply curve of an economy is:

An increase in investment spending caused by a decline in the interest rate will:

Which of the diagrams below best portrays the effects of an increase in consumer spending?

A decrease in taxes will cause a(n):

Wage contracts, efficiency wages, and the minimum wage are explanations for why:

Refer to the diagram given below. Assume that the nominal wages of workers in an economy are initially set on the basis of the price level P2 and that the economy is initially operating at the full-employment level of output Qf.In the long run, an increase in the price level from P2 to P3 will:

If the price level increases in Canada relative to foreign countries, then Canadian consumers will purchase more foreign goods and fewer Canadian goods.This statement describes:

Refer to the above diagram.If equilibrium real output is Q2, then:

Aggregate demand decreases and real output falls but the price level remains the same.Which factor most likely contributes to downward price inflexibility?

Refer to the figure given below. In the above figure, AD1 and AS1 represent the original aggregate demand and aggregate supply curves, respectively.AD2 and AS2 show the new aggregate demand and aggregate supply curves.The change in aggregate supply from AS1 to AS2 could be caused by:

The foreign-trade effect causes the aggregate demand curve for an economy to:

Which of the following statements correctly states the relationship between the per-unit production cost of output and productivity?

Which of the following would not shift the aggregate supply curve?

Refer to the diagram given below. Assume that the nominal wages of workers in an economy are initially set on the basis of the price level P2 and that the economy is initially operating at the full-employment level of output Qf.In the short run, an increase in the price level from P2 to P3 will:

An increase in imports (independently of a change in our price level) will increase both aggregate supply and aggregate demand.

Which of the above diagrams best portrays the effects of a substantial reduction in government spending?

B: Limits, Alternatives, and Choices

A: - Limits, Alternatives, and Choices

B: The Market System and the Circular Flow

A: - The Market System and the Circular Flow

B: Demand, Supply, and Market Equilibrium

A: - Demand, Supply, and Market Equilibrium

B: Market Failures: Public Goods and Externalities

A: - Market Failures: Public Goods and Externalities

B: Governments Role and Government Failure

A: Governments Role and Government Failure

B: an Introduction to Macroeconomics

A: an Introduction to Macroeconomics

B: Measuring the Economys Output

A: Measuring the Economys Output

B: Economic Growth

A: Economic Growth

B: Business Cycles, Unemployment, and Inflation

A: Business Cycles, Unemployment, and Inflation

B: Basic Macroeconomic Relationships

A: Basic Macroeconomic Relationships

B: The Aggregate Expenditures Model

A: The Aggregate Expenditures Model

A: Aggregate Demand and Aggregate Supply

B: Fiscal Policy, Deficits, Surpluses, and Debt

A: Fiscal Policy, Deficits, Surpluses, and Debt

B: Money, Banking, and Money Creation

A: Money, Banking, and Money Creation

B: Interest Rates and Monetary Policy

A: Interest Rates and Monetary Policy

C: Financial Economics

A: Long-Run Macroeconomic Adjustments

B: Long-Run Macroeconomic Adjustments

A: International Trade

B: International Trade

A: The Balance of Payments and Exchange Rates

B: The Balance of Payments and Exchange Rates

The Economics of Developing Countries

Filters

Refer to the above diagram.If equilibrium real output is Q₂, then:

Refer to the figure given below. In the above figure, AD₁ and AS₁ represent the original aggregate demand and aggregate supply curves, respectively.AD₂ and AS₂ show the new aggregate demand and aggregate supply curves.The change in aggregate supply from AS₁ to AS₂ could be caused by: