Question 1

If the price level rises,then the wealth effect leads to

Accepted Answer

A) an increase in real wealth, an increase in current consumption expenditure, and an increase in saving. 
B) an increase in real wealth, an increase in current consumption expenditure, and a decrease in saving. 
C) a decrease in real wealth, an increase in current consumption expenditure, and an increase in saving. 
D) a decrease in real wealth, an increase in current consumption expenditure, and a decrease in saving. 
E) a decrease in real wealth, a decrease in current consumption expenditure, and an increase in saving. 
A) an increase in real wealth, an increase in current consumption expenditure, and an increase in saving. 
B) an increase in real wealth, an increase in current consumption expenditure, and a decrease in saving. 
C) a decrease in real wealth, an increase in current consumption expenditure, and an increase in saving. 
D) a decrease in real wealth, an increase in current consumption expenditure, and a decrease in saving. 
E) a decrease in real wealth, a decrease in current consumption expenditure, and an increase in saving.

Question 2

If the money wage rate falls,then

Accepted Answer

A) the AD curve shifts rightward. 
B) firms hire less labour. 
C) the LAS curve shifts rightward. 
D) the SAS curve shifts rightward. 
E) C and D. 
A) the AD curve shifts rightward. 
B) firms hire less labour. 
C) the LAS curve shifts rightward. 
D) the SAS curve shifts rightward. 
E) C and D.

Question 3

A technological advance shifts

Accepted Answer

A) both SAS and AD rightward. 
B) both SAS and LAS leftward. 
C) SAS rightward but leaves LAS unchanged. 
D) LAS rightward but leaves SAS unchanged. 
E) both SAS and LAS rightward. 
A) both SAS and AD rightward. 
B) both SAS and LAS leftward. 
C) SAS rightward but leaves LAS unchanged. 
D) LAS rightward but leaves SAS unchanged. 
E) both SAS and LAS rightward.

Question 4

Which one,if any,of the following events shift the short-run aggregate supply curve but not the long-run aggregate supply curve?

Accepted Answer

A) A change in factor prices. 
B) A change in the quantity of capital. 
C) An advance in technology. 
D) An increase in the full-employment quantity of labour. 
E) None of the above. 
A) A change in factor prices. 
B) A change in the quantity of capital. 
C) An advance in technology. 
D) An increase in the full-employment quantity of labour. 
E) None of the above.

Question 5

An inflationary gap is the amount by which

Accepted Answer

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

Question 6

Everything else remaining the same,the short-run aggregate supply curve shifts rightward if

Accepted Answer

A) the money wage rate increases. 
B) aggregate demand increases. 
C) the full-employment quantity of labour increases. 
D) factor prices increase. 
E) the quantity of capital decreases. 
A) the money wage rate increases. 
B) aggregate demand increases. 
C) the full-employment quantity of labour increases. 
D) factor prices increase. 
E) the quantity of capital decreases.

Question 7

Consider an economy starting from a position of full employment.Which one of the following occurs as a result of an advance in technology?

Accepted Answer

A) The price level falls. 
B) Real GDP decreases in the short run. 
C) An inflationary gap arises. 
D) Factor prices rise in the long run, shifting the short-run aggregate supply curve leftward. 
E) The long-run aggregate supply curve shifts leftward to create the new long-run equilibrium. 
A) The price level falls. 
B) Real GDP decreases in the short run. 
C) An inflationary gap arises. 
D) Factor prices rise in the long run, shifting the short-run aggregate supply curve leftward. 
E) The long-run aggregate supply curve shifts leftward to create the new long-run equilibrium.

Question 8

Which one of the following factors will not shift the aggregate demand curve?

Accepted Answer

A) an increase in the interest rate 
B) an increase in the expected inflation rate 
C) an increase in the price level 
D) an increase in expected future profits 
E) an increase in the quantity of money 
A) an increase in the interest rate 
B) an increase in the expected inflation rate 
C) an increase in the price level 
D) an increase in expected future profits 
E) an increase in the quantity of money

Question 9

Consider an economy starting from a position of full employment.Which one of the following changes does not occur as a result of an increase in aggregate demand?

Accepted Answer

A) The price level rises. 
B) Real GDP increases in the short run. 
C) An inflationary gap arises. 
D) Factor prices rise in the long run, shifting the short-run aggregate supply curve to the left. 
E) The long-run aggregate supply curve shifts rightward to create the new long-run equilibrium. 
A) The price level rises. 
B) Real GDP increases in the short run. 
C) An inflationary gap arises. 
D) Factor prices rise in the long run, shifting the short-run aggregate supply curve to the left. 
E) The long-run aggregate supply curve shifts rightward to create the new long-run equilibrium.

Question 10

The aggregate demand curve is a relationship between

Accepted Answer

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

Question 11

Use the figure below to answer the following questions.
   
Figure 26.3.1
-Refer to Figure 26.3.1.When the economy of Econoworld is in short-run macroeconomic equilibrium,the price level is

Accepted Answer

A) 100. 
B) 90. 
C) 75. 
D) 70. 
E) 85. 
A) 100. 
B) 90. 
C) 75. 
D) 70. 
E) 85.

Question 12

An increase in the money wage rate shifts

Accepted Answer

A) both SAS and LAS rightward. 
B) both SAS and LAS leftward. 
C) SAS leftward, but leaves LAS unchanged. 
D) LAS rightward, but leaves SAS unchanged. 
E) SAS rightward, but leaves LAS unchanged. 
A) both SAS and LAS rightward. 
B) both SAS and LAS leftward. 
C) SAS leftward, but leaves LAS unchanged. 
D) LAS rightward, but leaves SAS unchanged. 
E) SAS rightward, but leaves LAS unchanged.

Question 13

If factor prices remain constant ,an increase in aggregate demand

Accepted Answer

A) increases the price level and increases real GDP. 
B) increases the price level and decreases real GDP. 
C) decreases the price level and increases real GDP. 
D) decreases the price level and decreases real GDP. 
E) increases the price level, and leaves real GDP unchanged. 
A) increases the price level and increases real GDP. 
B) increases the price level and decreases real GDP. 
C) decreases the price level and increases real GDP. 
D) decreases the price level and decreases real GDP. 
E) increases the price level, and leaves real GDP unchanged.

Question 14

Everything else remaining the same,an increase in the interest rate increases saving and

Accepted Answer

A) increases aggregate demand through the international substitution effect. 
B) decreases aggregate demand through the international substitution effect. 
C) increases aggregate demand through the intertemporal substitution effect. 
D) decreases aggregate demand through the intertemporal substitution effect. 
E) increases aggregate demand through the wealth effect. 
A) increases aggregate demand through the international substitution effect. 
B) decreases aggregate demand through the international substitution effect. 
C) increases aggregate demand through the intertemporal substitution effect. 
D) decreases aggregate demand through the intertemporal substitution effect. 
E) increases aggregate demand through the wealth effect.

Question 15

Use the figure below to answer the following questions.
   
Figure 26.2.1
-Refer to Figure 26.2.1.Which graph illustrates what happens when government expenditure decreases?

Accepted Answer

A) (a) 
B) (b) 
C) (c) 
D) (d) 
E) (a)and (b) 
A) (a) 
B) (b) 
C) (c) 
D) (d) 
E) (a)and (b)

Question 16

Use the figure below to answer the following questions.
   
Figure 26.2.1
-Refer to Figure 26.2.1.Which graph illustrates what happens when the quantity of money increases?

Accepted Answer

A) (a) 
B) (b) 
C) (c) 
D) (d) 
E) (a)and (b) 
A) (a) 
B) (b) 
C) (c) 
D) (d) 
E) (a)and (b)

Question 17

The quantity of real GDP demanded is the sum of real consumption expenditure (C),investment (I),

Accepted Answer

A) government expenditure (G), exports (X), and imports (M). 
B) government expenditure (G), and exports (X)minus imports (M). 
C) exports (X), and imports (M). 
D) and exports (X)minus imports (M). 
E) and government expenditure (G). 
A) government expenditure (G), exports (X), and imports (M). 
B) government expenditure (G), and exports (X)minus imports (M). 
C) exports (X), and imports (M). 
D) and exports (X)minus imports (M). 
E) and government expenditure (G).

Question 18

Your total wealth is $1,000,which you are holding in your savings account.If the price level rises by 10 percent,your wealth

Accepted Answer

A) increases by an unknown amount. 
B) is unchanged. 
C) decreases to $990. 
D) is worth 10 percent less than before the price level change. 
E) increases to $1,100. 
A) increases by an unknown amount. 
B) is unchanged. 
C) decreases to $990. 
D) is worth 10 percent less than before the price level change. 
E) increases to $1,100.

Question 19

Use the table below to answer the following question.
Table 26.3.2
  
-Refer to Table 26.3.2.The International Monetary Fund's World Economic Outlook database provides the data given in the table for India in 2004,2005 and 2006.
The numbers in the table are consistent with

Accepted Answer

A) increases in long-run and short-run aggregate supply and even greater increases in aggregate demand. 
B) increases in short-run aggregate supply and increases in aggregate demand, but the increases in aggregate demand are smaller than the increases in short-run aggregate supply. 
C) increases in long-run and short-run aggregate supply and even larger decreases in aggregate demand. 
D) decreases in long-run and short-run aggregate supply and even greater decreases in aggregate demand. 
E) increases in short-run aggregate supply and no change in aggregate demand. 
A) increases in long-run and short-run aggregate supply and even greater increases in aggregate demand. 
B) increases in short-run aggregate supply and increases in aggregate demand, but the increases in aggregate demand are smaller than the increases in short-run aggregate supply. 
C) increases in long-run and short-run aggregate supply and even larger decreases in aggregate demand. 
D) decreases in long-run and short-run aggregate supply and even greater decreases in aggregate demand. 
E) increases in short-run aggregate supply and no change in aggregate demand.

Question 20

Use the figure below to answer the following question.
   
Figure 26.3.4
-Which of the following will lower the price level for sure?

Accepted Answer

A) The AD curve shifts rightward and the SAS curve shifts leftward. 
B) The AD curve shifts rightward and the SAS curve remains unchanged. 
C) The SAS curve shifts leftward. 
D) The LAS curve shifts leftward. 
E) None of the above. 
A) The AD curve shifts rightward and the SAS curve shifts leftward. 
B) The AD curve shifts rightward and the SAS curve remains unchanged. 
C) The SAS curve shifts leftward. 
D) The LAS curve shifts leftward. 
E) None of the above.

Exam 26: Aggregate Supply and Aggregate Demand

If the price level rises,then the wealth effect leads to

If the money wage rate falls,then

A technological advance shifts

Which one,if any,of the following events shift the short-run aggregate supply curve but not the long-run aggregate supply curve?

An inflationary gap is the amount by which

Everything else remaining the same,the short-run aggregate supply curve shifts rightward if

Consider an economy starting from a position of full employment.Which one of the following occurs as a result of an advance in technology?

Which one of the following factors will not shift the aggregate demand curve?

Consider an economy starting from a position of full employment.Which one of the following changes does not occur as a result of an increase in aggregate demand?

The aggregate demand curve is a relationship between

Use the figure below to answer the following questions. Figure 26.3.1 -Refer to Figure 26.3.1.When the economy of Econoworld is in short-run macroeconomic equilibrium,the price level is

An increase in the money wage rate shifts

If factor prices remain constant ,an increase in aggregate demand

Everything else remaining the same,an increase in the interest rate increases saving and

Use the figure below to answer the following questions. Figure 26.2.1 -Refer to Figure 26.2.1.Which graph illustrates what happens when government expenditure decreases?

Use the figure below to answer the following questions. Figure 26.2.1 -Refer to Figure 26.2.1.Which graph illustrates what happens when the quantity of money increases?

The quantity of real GDP demanded is the sum of real consumption expenditure (C),investment (I),

Your total wealth is $1,000,which you are holding in your savings account.If the price level rises by 10 percent,your wealth

Use the table below to answer the following question. Table 26.3.2 -Refer to Table 26.3.2.The International Monetary Fund's World Economic Outlook database provides the data given in the table for India in 2004,2005 and 2006. The numbers in the table are consistent with

Use the figure below to answer the following question. Figure 26.3.4 -Which of the following will lower the price level for sure?

What Is Economics?

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Externalities

Public Goods and Common Resources

Markets for Factors of Production

Economic Inequality

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 Keynesian Model

Canadian Inflation, Unemployment, and Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

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