Question 1

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

Question 2

Use the figure below to answer the following questions.
   
Figure 26.3.1
-Refer to Figure 26.3.1.Short-run macroeconomic equilibrium real GDP in Econoworld is

Accepted Answer

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

Question 3

Use the figure below to answer the following questions.
   
Figure 26.3.5
-Refer to Figure 26.3.5.Potential GDP is

Accepted Answer

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

Question 4

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

Accepted Answer

A) The price level decreases. 
B) The level of real GDP decreases in the short run. 
C) A recessionary gap arises. 
D) Factor prices decrease in the long run, shifting the short-run aggregate supply curve rightward. 
E) The long-run aggregate supply curve shifts leftward to create the new long-run equilibrium. 
A) The price level decreases. 
B) The level of real GDP decreases in the short run. 
C) A recessionary gap arises. 
D) Factor prices decrease in the long run, shifting the short-run aggregate supply curve rightward. 
E) The long-run aggregate supply curve shifts leftward to create the new long-run equilibrium.

Question 5

Everything else remaining the same,an increase in foreign income

Accepted Answer

A) increases Canada's aggregate supply. 
B) increases Canada's aggregate demand. 
C) decreases Canada's aggregate demand. 
D) creates a movement downward along Canada's aggregate demand curve. 
E) decreases Canada's aggregate supply. 
A) increases Canada's aggregate supply. 
B) increases Canada's aggregate demand. 
C) decreases Canada's aggregate demand. 
D) creates a movement downward along Canada's aggregate demand curve. 
E) decreases Canada's aggregate supply.

Question 6

The long-run aggregate supply curve is

Accepted Answer

A) vertical. 
B) negatively sloped. 
C) positively sloped but extremely steep. 
D) almost flat. 
E) positively sloped at low levels of real GDP and vertical at high levels of real GDP. 
A) vertical. 
B) negatively sloped. 
C) positively sloped but extremely steep. 
D) almost flat. 
E) positively sloped at low levels of real GDP and vertical at high levels of real GDP.

Question 7

Use the figure below to answer the following questions.
   
Figure 26.3.2
-Refer to Figure 26.3.2.When the economy of Mythlo is in short-run macroeconomic equilibrium,the price level is

Accepted Answer

A) 65. 
B) 95. 
C) 70. 
D) 75. 
E) 80. 
A) 65. 
B) 95. 
C) 70. 
D) 75. 
E) 80.

Question 8

Use the figure below to answer the following questions.
   
Figure 26.3.2
-Refer to Figure 26.3.2.Currently in Mythlo

Accepted Answer

A) there is a below full-employment equilibrium. 
B) the actual unemployment rate is less than the natural unemployment rate. 
C) potential GDP is greater than equilibrium GDP. 
D) the actual unemployment rate is equal to the natural unemployment rate. 
E) there is a recessionary gap. 
A) there is a below full-employment equilibrium. 
B) the actual unemployment rate is less than the natural unemployment rate. 
C) potential GDP is greater than equilibrium GDP. 
D) the actual unemployment rate is equal to the natural unemployment rate. 
E) there is a recessionary gap.

Question 9

Keynesian macroeconomists recommend

Accepted Answer

A) an increase in the quantity of money to offset decreases in aggregate demand and a decrease in the quantity of money to offset increases in aggregate demand. 
B) policies that actively offset changes in long-run aggregate supply that result in negative economic growth. 
C) policies that minimize the disincentive effects of taxes on employment, investment, and technological change. 
D) policies that actively offset changes in aggregate demand that bring recession. 
E) none of the above. 
A) an increase in the quantity of money to offset decreases in aggregate demand and a decrease in the quantity of money to offset increases in aggregate demand. 
B) policies that actively offset changes in long-run aggregate supply that result in negative economic growth. 
C) policies that minimize the disincentive effects of taxes on employment, investment, and technological change. 
D) policies that actively offset changes in aggregate demand that bring recession. 
E) none of the above.

Question 10

Use the figure below to answer the following questions.
   
Figure 26.3.5
-Refer to Figure 26.3.5.The shift of the aggregate demand curve from AD? to AD? might have been the result of

Accepted Answer

A) an increase in government expenditure. 
B) a decrease in taxes. 
C) an increase in the quantity of money. 
D) a fall in the foreign exchange rate 
E) all of the above. 
A) an increase in government expenditure. 
B) a decrease in taxes. 
C) an increase in the quantity of money. 
D) a fall in the foreign exchange rate 
E) all of the above.

Question 11

Use the figure below to answer the following questions.
   
Figure 26.3.5
-Refer to Figure 26.3.5.When the economy is at full employment,real GDP is

Accepted Answer

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

Question 12

Use the figure below to answer the following questions.
   
Figure 26.3.3
-Refer to Figure 26.3.3(b).You might expect the government to

Accepted Answer

A) do nothing except maintain the current equilibrium. 
B) cut government expenditure. 
C) increase government expenditure. 
D) pursue trade policies that reduce exports. 
E) raise taxes. 
A) do nothing except maintain the current equilibrium. 
B) cut government expenditure. 
C) increase government expenditure. 
D) pursue trade policies that reduce exports. 
E) raise taxes.

Question 13

Use the figure below to answer the following questions.
   
Figure 26.3.3
-Refer to Figure 26.3.3.In which of the graphs would we predict that eventually the price level will fall and real GDP will increase,all else remaining the same?

Accepted Answer

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

Question 14

Use the figure below to answer the following questions.
   
Figure 26.3.2
-Refer to Figure 26.3.2.Short-run macroeconomic equilibrium real GDP in Mythlo is ________ billion.

Accepted Answer

A) $500 
B) $650 
C) $550 
D) $600 
E) $475 
A) $500 
B) $650 
C) $550 
D) $600 
E) $475

Question 15

Use the table below to answer the following questions.
Table 26.3.1
  
-Refer to Table 26.3.1.As this economy moves to long-run equilibrium,the

Accepted Answer

A) SAS curve shifts leftward. 
B) SAS curve shifts rightward. 
C) AD curve shifts rightward. 
D) AD curve shifts leftward. 
E) LAS curve shifts leftward. 
A) SAS curve shifts leftward. 
B) SAS curve shifts rightward. 
C) AD curve shifts rightward. 
D) AD curve shifts leftward. 
E) LAS curve shifts leftward.

Question 16

The quantity of real GDP demanded does not depend on decisions made by

Accepted Answer

A) foreigners. 
B) households. 
C) suppliers. 
D) governments. 
E) firms. 
A) foreigners. 
B) households. 
C) suppliers. 
D) governments. 
E) firms.

Question 17

Use the table below to answer the following questions.
Table 26.3.3
  
-Refer to Table 26.3.3.With no interference from the central bank or the government,the

Accepted Answer

A) short-run aggregate supply curve will shift rightward. 
B) short-run aggregate supply curve will shift leftward. 
C) long-run aggregate supply curve will shift rightward. 
D) long-run aggregate supply curve will shift leftward. 
E) Both A and C will occur. 
A) short-run aggregate supply curve will shift rightward. 
B) short-run aggregate supply curve will shift leftward. 
C) long-run aggregate supply curve will shift rightward. 
D) long-run aggregate supply curve will shift leftward. 
E) Both A and C will occur.

Question 18

Use the figure below to answer the following question.
   
Figure 26.3.4
-Refer to Figure 26.3.4.The changes represented

Accepted Answer

A) cannot occur because aggregate demand and short-run aggregate supply cannot change at the same time. 
B) lead to an inflationary gap. 
C) lead to a recessionary gap. 
D) cause a proportionate increase in long run aggregate supply. 
E) increase real GDP. 
A) cannot occur because aggregate demand and short-run aggregate supply cannot change at the same time. 
B) lead to an inflationary gap. 
C) lead to a recessionary gap. 
D) cause a proportionate increase in long run aggregate supply. 
E) increase real GDP.

Question 19

Use the figure below to answer the following questions.
   
Figure 26.3.3
-Refer to Figure 26.3.3(a).You might expect the government to

Accepted Answer

A) do nothing except maintain the current equilibrium. 
B) cut government expenditure. 
C) increase government expenditure. 
D) pursue trade policies that reduce exports. 
E) raise taxes. 
A) do nothing except maintain the current equilibrium. 
B) cut government expenditure. 
C) increase government expenditure. 
D) pursue trade policies that reduce exports. 
E) raise taxes.

Question 20

Use the table below to answer the following questions.
Table 26.3.1
  
-Refer to Table 26.3.1.Consider the economy represented in the table.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) 125;$550 
B) 120;$600 
C) 120;$500 
D) 130;$600 
E) 130;$500 
A) 125;$550 
B) 120;$600 
C) 120;$500 
D) 130;$600 
E) 130;$500

Exam 26: Aggregate Supply and Aggregate Demand

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

Use the figure below to answer the following questions. Figure 26.3.1 -Refer to Figure 26.3.1.Short-run macroeconomic equilibrium real GDP in Econoworld is

Use the figure below to answer the following questions. Figure 26.3.5 -Refer to Figure 26.3.5.Potential GDP is

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

Everything else remaining the same,an increase in foreign income

The long-run aggregate supply curve is

Use the figure below to answer the following questions. Figure 26.3.2 -Refer to Figure 26.3.2.When the economy of Mythlo is in short-run macroeconomic equilibrium,the price level is

Use the figure below to answer the following questions. Figure 26.3.2 -Refer to Figure 26.3.2.Currently in Mythlo

Keynesian macroeconomists recommend

Use the figure below to answer the following questions. Figure 26.3.5 -Refer to Figure 26.3.5.The shift of the aggregate demand curve from AD? to AD? might have been the result of

Use the figure below to answer the following questions. Figure 26.3.5 -Refer to Figure 26.3.5.When the economy is at full employment,real GDP is

Use the figure below to answer the following questions. Figure 26.3.3 -Refer to Figure 26.3.3(b).You might expect the government to

Use the figure below to answer the following questions. Figure 26.3.3 -Refer to Figure 26.3.3.In which of the graphs would we predict that eventually the price level will fall and real GDP will increase,all else remaining the same?

Use the figure below to answer the following questions. Figure 26.3.2 -Refer to Figure 26.3.2.Short-run macroeconomic equilibrium real GDP in Mythlo is ________ billion.

Use the table below to answer the following questions. Table 26.3.1 -Refer to Table 26.3.1.As this economy moves to long-run equilibrium,the

The quantity of real GDP demanded does not depend on decisions made by

Use the table below to answer the following questions. Table 26.3.3 -Refer to Table 26.3.3.With no interference from the central bank or the government,the

Use the figure below to answer the following question. Figure 26.3.4 -Refer to Figure 26.3.4.The changes represented

Use the figure below to answer the following questions. Figure 26.3.3 -Refer to Figure 26.3.3(a).You might expect the government to

Use the table below to answer the following questions. Table 26.3.1 -Refer to Table 26.3.1.Consider the economy represented in the table.The economy eventually moves to its long-run equilibrium.In long-run equilibrium,the price level is ________ and real GDP is ________ billion.

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

Filters

Use the table below to answer the following questions. Table 26.3.1 -Refer to Table 26.3.1.Consider the economy represented in the table.The economy eventually moves to its long-run equilibrium.In long-run equilibrium,the price level is and real GDP is billion.