Question 1

An increase in the aggregate expenditures schedule:

Accepted Answer

A) increases aggregate demand by the amount of the increase in aggregate expenditures only. 
B) increases aggregate demand by the amount of the initial increase in aggregate expenditures times the multiplier. 
C) decreases aggregate demand by the amount of the increase in aggregate expenditures. 
D) decreases aggregate demand by the amount of the initial increase in aggregate expenditures times the multiplier. 
A) increases aggregate demand by the amount of the increase in aggregate expenditures only. 
B) increases aggregate demand by the amount of the initial increase in aggregate expenditures times the multiplier. 
C) decreases aggregate demand by the amount of the increase in aggregate expenditures. 
D) decreases aggregate demand by the amount of the initial increase in aggregate expenditures times the multiplier.

Question 2

The following aggregate demand and supply schedules are for a hypothetical economy:   Refer to the above data.If the price level is 150 and producers supply $300 of real output:

Accepted Answer

A) a shortage of real output of $200 will occur. 
B) a shortage of real output of $100 will occur. 
C) a surplus of real output of $300 will occur. 
D) neither a shortage nor a surplus of real output will occur. 
A) a shortage of real output of $200 will occur. 
B) a shortage of real output of $100 will occur. 
C) a surplus of real output of $300 will occur. 
D) neither a shortage nor a surplus of real output will occur.

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.

Question 4

An increase in aggregate demand is most likely to be caused by a decrease in:

Accepted Answer

A) the wealth of consumers. 
B) consumer confidence. 
C) business confidence. 
D) the tax rates on household income. 
A) the wealth of consumers. 
B) consumer confidence. 
C) business confidence. 
D) the tax rates on household income.

Question 5

The following table gives information about the relationship between input quantities and real domestic output in a hypothetical economy:   Refer to the above information, the level of productivity is:

Accepted Answer

A) 2 
B) .5. 
C) 4 
D) 200 
A) 2 
B) .5. 
C) 4 
D) 200

Question 6

The factors which affect the amounts that consumers, businesses, government, and foreigners wish to purchase at each price level are the:

Accepted Answer

A) wealth, interest rate, and foreign trade effects. 
B) determinants of aggregate supply. 
C) determinants of aggregate demand. 
D) sole determinants of the equilibrium price level and the equilibrium real output. 
A) wealth, interest rate, and foreign trade effects. 
B) determinants of aggregate supply. 
C) determinants of aggregate demand. 
D) sole determinants of the equilibrium price level and the equilibrium real output.

Question 7

Refer to the table below that shows the data of a country.   The table given above 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 the figures are in billions of dollars.If the country's aggregate supply curve is a vertical line at the $25 billion level of real GDP, the price level will be:

Accepted Answer

A) 128. 
B) 125. 
C) 122. 
D) 119. 
A) 128. 
B) 125. 
C) 122. 
D) 119.

Question 8

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.   Refer to the above table.The interest rate effect of changes in the price level is shown by columns:

Accepted Answer

A) (1) and (4) of the table. 
B) (5) and (6) of the table. 
C) (1) and (3) of the table. 
D) (2) and (4) of the table. 
A) (1) and (4) of the table. 
B) (5) and (6) of the table. 
C) (1) and (3) of the table. 
D) (2) and (4) of the table.

Question 9

If the current price level was such that the aggregate quantity demanded exceeded the aggregate quantity supplied, we would expect:

Accepted Answer

A) inflation to occur. 
B) the aggregate demand curve to shift rightward. 
C) the aggregate demand curve to shift leftward. 
D) the ratchet effect to be applicable. 
A) inflation to occur. 
B) the aggregate demand curve to shift rightward. 
C) the aggregate demand curve to shift leftward. 
D) the ratchet effect to be applicable.

Question 10

Which of the following is incorrect?

Accepted Answer

A) As the Canadian price level rises, Canadian goods become relatively more expensive so that its exports fall and its imports rise. 
B) As the price level falls, the demand for money declines, the interest rate declines, and interest rate-sensitive spending increases. 
C) When the price level increases, real balances increase, businesses and households find themselves wealthier and therefore increase their spending. 
D) Given aggregate demand, an increase in aggregate supply increases real output and, assuming downward flexible prices, reduces the price level. 
A) As the Canadian price level rises, Canadian goods become relatively more expensive so that its exports fall and its imports rise. 
B) As the price level falls, the demand for money declines, the interest rate declines, and interest rate-sensitive spending increases. 
C) When the price level increases, real balances increase, businesses and households find themselves wealthier and therefore increase their spending. 
D) Given aggregate demand, an increase in aggregate supply increases real output and, assuming downward flexible prices, reduces the price level.

Question 11

Other things equal, an increase in the price level will:

Accepted Answer

A) shift the short run aggregate supply curve to the right. 
B) shift the aggregate demand curve to the right. 
C) cause a movement up along a short-run aggregate supply curve. 
D) cause a movement down a short run aggregate supply curve. 
A) shift the short run aggregate supply curve to the right. 
B) shift the aggregate demand curve to the right. 
C) cause a movement up along a short-run aggregate supply curve. 
D) cause a movement down a short run aggregate supply curve.

Question 12

Refer to the diagram given below.   Suppose an increase in aggregate demand shifts AD1 to AD2.At P1, the amount of output demanded will be:

Accepted Answer

A) equal to the amount of output supplied. 
B) greater than the amount of output supplied. 
C) less than the amount of output supplied. 
D) at the full-employment level of output. 
A) equal to the amount of output supplied. 
B) greater than the amount of output supplied. 
C) less than the amount of output supplied. 
D) at the full-employment level of output.

Question 13

An increase in business taxes will shift the aggregate supply curve leftward.

Accepted Answer

A) True 
 B)False

Question 14

Refer to the information below.A change in net export spending would most likely be caused by changes in: The following list of factors is related to the aggregate demand curve.Real-balances effect
Household expectations
Interest-rate effect
Personal income tax rates
Profit expectations
National income abroad
Government spending
Foreign trade effect
Exchange rates
Degree of excess capacity

Accepted Answer

A) 2 and 3. 
B) 5 and 6. 
C) 7 and 8. 
D) 6 and 9. 
A) 2 and 3. 
B) 5 and 6. 
C) 7 and 8. 
D) 6 and 9.

Question 15

If there is a decrease in the price level, then it will increase aggregate expenditures and this change is equivalent to a(n):

Accepted Answer

A) increase in aggregate supply. 
B) increase in aggregate demand. 
C) decrease in aggregate demand. 
D) movement along an aggregate demand curve. 
A) increase in aggregate supply. 
B) increase in aggregate demand. 
C) decrease in aggregate demand. 
D) movement along an aggregate demand curve.

Question 16

Which would be considered to be one of the factors that shift the aggregate supply curve? A change in:

Accepted Answer

A) consumer spending. 
B) net export spending. 
C) government regulation. 
D) profit expectations on investment projects. 
A) consumer spending. 
B) net export spending. 
C) government regulation. 
D) profit expectations on investment projects.

Question 17

Other things being equal, the higher the price level, the lower the level of domestic output purchased.This occurs because of:

Accepted Answer

A) the real-balances effect. 
B) consumer spending on capital goods. 
C) the full-employment-unemployment rate. 
D) the sensitivity to demand-pull inflation. 
A) the real-balances effect. 
B) consumer spending on capital goods. 
C) the full-employment-unemployment rate. 
D) the sensitivity to demand-pull inflation.

Question 18

The foreign trade effect suggests that an increase in the Canadian price level relative to other countries will:

Accepted Answer

A) increase the amount of Canadian real output purchased. 
B) increase Canadian imports and decrease Canadian exports. 
C) increase both Canadian imports and Canadian exports. 
D) decrease both Canadian imports and Canadian exports. 
A) increase the amount of Canadian real output purchased. 
B) increase Canadian imports and decrease Canadian exports. 
C) increase both Canadian imports and Canadian exports. 
D) decrease both Canadian imports and Canadian exports.

Question 19

Changes in which of the two factors below would most likely cause a change in consumer spending? The following list of factors, are related to the aggregate demand curve.Real-balances effect
Household expectations
Interest-rate effect
Personal income tax rates
Profit expectations
National income abroad
Government spending
Foreign trade effect
Exchange rates
Degree of excess capacity

Accepted Answer

A) 1 and 3 
B) 2 and 4 
C) 5 and 10 
D) 8 and 9 
A) 1 and 3 
B) 2 and 4 
C) 5 and 10 
D) 8 and 9

Question 20

When the excess capacity of business rises, aggregate:

Accepted Answer

A) demand increases. 
B) demand decreases. 
C) supply increases. 
D) supply decreases. 
A) demand increases. 
B) demand decreases. 
C) supply increases. 
D) supply decreases.

Exam 12: Part B: Aggregate Demand and Aggregate Supply

An increase in the aggregate expenditures schedule:

The following aggregate demand and supply schedules are for a hypothetical economy: Refer to the above data.If the price level is 150 and producers supply $300 of real output:

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

An increase in aggregate demand is most likely to be caused by a decrease in:

The following table gives information about the relationship between input quantities and real domestic output in a hypothetical economy: Refer to the above information, the level of productivity is:

The factors which affect the amounts that consumers, businesses, government, and foreigners wish to purchase at each price level are the:

If the current price level was such that the aggregate quantity demanded exceeded the aggregate quantity supplied, we would expect:

Which of the following is incorrect?

Other things equal, an increase in the price level will:

Refer to the diagram given below. Suppose an increase in aggregate demand shifts AD1 to AD2.At P1, the amount of output demanded will be:

An increase in business taxes will shift the aggregate supply curve leftward.

If there is a decrease in the price level, then it will increase aggregate expenditures and this change is equivalent to a(n):

Which would be considered to be one of the factors that shift the aggregate supply curve? A change in:

Other things being equal, the higher the price level, the lower the level of domestic output purchased.This occurs because of:

The foreign trade effect suggests that an increase in the Canadian price level relative to other countries will:

When the excess capacity of business rises, aggregate:

Part A: Limits, Alternatives, and Choices

Part B: Limits, Alternatives, and Choices

Part A: The Market System and the Circular Flow

Part B: The Market System and the Circular Flow

Part A: Demand, Supply, and Market Equilibrium

Part B: Demand, Supply, and Market Equilibrium

Part A: Market Failures: Public Goods and Externalities

Part B: Market Failures: Public Goods and Externalities

Part A: Governments Role and Government Failure

Part B: Governments Role and Government Failure

Part A: An Introduction to Macroeconomics

Part B: An Introduction to Macroeconomics

Part A: Measuring the Economys Output

Part B: Measuring the Economys Output

Part A: Economic Growth

Part B: Economic Growth

Part A: Business Cycles, Unemployment, and Inflation

Part B: Business Cycles, Unemployment, and Inflation

Part A: Basic Macroeconomic Relationships

Part B: Basic Macroeconomic Relationships

Part A: The Aggregate Expenditures Model

Part B: The Aggregate Expenditures Model

Part A: Aggregate Demand and Aggregate Supply

Part A: Fiscal Policy, Deficits, Surpluses, and Debt

Part B: Fiscal Policy, Deficits, Surpluses, and Debt

Part A: Money, Banking, and Money Creation

Part B: Money, Banking, and Money Creation

Part A: Interest Rates and Monetary Policy

Part B: Interest Rates and Monetary Policy

Part A: Long-Run Macroeconomic Adjustments

Part B: Long-Run Macroeconomic Adjustments

Part A: International Trade

Part B: International Trade

Part C: Financial Economics

Part A: The Balance of Payments and Exchange Rates

Part B: The Balance of Payments and Exchange Rates

The Economics of Developing Countries

Filters

Refer to the diagram given below. Suppose an increase in aggregate demand shifts AD₁ to AD₂.At P₁, the amount of output demanded will be: