Exam 12: Part B: Aggregate Demand and Aggregate Supply

An economy is employing 2 units of capital, 5 units of raw materials, and 8 units of labour to produce its total output of 640 units.Each unit of capital costs $10, each unit of raw materials, $4, and each unit of labour, $3.Refer to the above information.If the per unit price of raw materials rises from $4 to $8 and all else remains constant, the per unit cost of production will rise by about:

Refer to the diagram given below. Assume that the nominal wages of workers 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 Q_f.In the short run, demand-pull inflation could best be shown as:

Other things equal, if world oil prices increased by 70 percent then the most likely effect would be to:

Refer to the diagram below.Other things equal, a shift of the aggregate supply curve from AS₀ to AS₁ might be caused by a(n):

Cost-push inflation occurs because of a:

The shape of the aggregate demand curve is explained by the:

The Canadian economy was able to achieve full employment with relative price level stability in the early 2000 because aggregate:

In terms of aggregate supply, the difference between the long run and the short run is that in the long run:

An increase in taxes will cause a(n):

Refer to the diagram given below.There are two panels in the diagram. Assuming a constant price level, an increase in the aggregate expenditures schedule from AE₁ to AE₂ would:

Income and substitution effects what portions, if any, of aggregate supply and/or aggregate demand?

In the late 1990s and early 2000s:

The interest-rate effect suggests that:

The following table is for a particular country in which C is consumption expenditures, I_g 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:

An increase in the GDP price level will:

Cost-push inflation arises from:

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 Q_f.In the short run, an increase in the price level from P₂ to P₃ will:

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:

Which would increase aggregate supply?

In deriving the aggregate demand curve from the aggregate expenditures model we note that: