Question 1

The short-run aggregate supply curve is the relationship between the quantity of real GDP supplied and

Accepted Answer

A) the quantity of real GDP demanded. 
B) real income. 
C) the inflation rate. 
D) the real interest rate. 
E) the price level. 
A) the quantity of real GDP demanded. 
B) real income. 
C) the inflation rate. 
D) the real interest rate. 
E) the price level.

Question 2

An increase in oil prices to a country that is a net importer of oil shifts

Accepted Answer

A) both the short-run aggregate supply and long-run aggregate supply curves rightward. 
B) both the short-run aggregate supply and long-run aggregate supply curves leftward. 
C) the short-run aggregate supply curve leftward, but leaves the long-run aggregate supply curve unchanged. 
D) the long-run aggregate supply curve rightward, but leaves the short-run aggregate supply curve unchanged. 
E) the short-run aggregate supply curve leftward, but shifts the long-run aggregate supply curve rightward. 
A) both the short-run aggregate supply and long-run aggregate supply curves rightward. 
B) both the short-run aggregate supply and long-run aggregate supply curves leftward. 
C) the short-run aggregate supply curve leftward, but leaves the long-run aggregate supply curve unchanged. 
D) the long-run aggregate supply curve rightward, but leaves the short-run aggregate supply curve unchanged. 
E) the short-run aggregate supply curve leftward, but shifts the long-run aggregate supply curve rightward.

Question 3

Use the figure below to answer the following questions.
   
Figure 26.3.1
-Refer to Figure 26.3.1.Consider statements (1)and (2)and select the correct answer.
(1) The economy of Econoworld is experiencing an above full-employment equilibrium.
(2) SAS will automatically shift rightward as the economy adjusts to long-run equilibrium.

Accepted Answer

A) (1)is true;(2)is false. 
B) (2)is true;(1)is false. 
C) (1)and (2)are false. 
D) (1)and (2)are true. 
E) (1)is true;(2)is true if unemployment is below the natural rate. 
A) (1)is true;(2)is false. 
B) (2)is true;(1)is false. 
C) (1)and (2)are false. 
D) (1)and (2)are true. 
E) (1)is true;(2)is true if unemployment is below the natural rate.

Question 4

The short-run aggregate supply curve indicates

Accepted Answer

A) the relationship between the price level and real GDP demanded by consumers, investors, governments, and net exporters. 
B) the relationship between the price level and the natural unemployment rate. 
C) the relationship between the purchasing power of wages and the quantity of labour supplied by households. 
D) the relationship between the quantity of real GDP supplied and the price level when the money wage rate, the prices of other resources, and potential GDP remain constant. 
E) the various quantities of real GDP producers supply at different income levels. 
A) the relationship between the price level and real GDP demanded by consumers, investors, governments, and net exporters. 
B) the relationship between the price level and the natural unemployment rate. 
C) the relationship between the purchasing power of wages and the quantity of labour supplied by households. 
D) the relationship between the quantity of real GDP supplied and the price level when the money wage rate, the prices of other resources, and potential GDP remain constant. 
E) the various quantities of real GDP producers supply at different income levels.

Question 5

Which one of the following shifts the aggregate demand curve leftward?

Accepted Answer

A) a decrease in the interest rate 
B) an increase in expected inflation 
C) an increase in taxes 
D) an increase in the price level 
E) an increase in the money wage rate 
A) a decrease in the interest rate 
B) an increase in expected inflation 
C) an increase in taxes 
D) an increase in the price level 
E) an increase in the money wage rate

Question 6

Everything else remaining the same,which one of the following increases aggregate demand?

Accepted Answer

A) an increase in taxes 
B) an increase in transfer payments 
C) a decrease in government spending 
D) a decrease in the price level 
E) a decrease in the quantity of money 
A) an increase in taxes 
B) an increase in transfer payments 
C) a decrease in government spending 
D) a decrease in the price level 
E) a decrease in the quantity of money

Question 7

Which one of the following newspaper quotations describes a rightward shift of the LAS curve?

Accepted Answer

A) "The decrease in consumer spending may lead to a recession." 
B) "The increase in consumer spending is expected to lead to inflation, without any increase in real GDP." 
C) "Recent higher wage settlements are expected to cause higher inflation this year." 
D) "Growth has been unusually high the last few years due to more women entering the work force." 
E) "The recent tornadoes destroyed many factories in Calgary and Edmonton." 
A) "The decrease in consumer spending may lead to a recession." 
B) "The increase in consumer spending is expected to lead to inflation, without any increase in real GDP." 
C) "Recent higher wage settlements are expected to cause higher inflation this year." 
D) "Growth has been unusually high the last few years due to more women entering the work force." 
E) "The recent tornadoes destroyed many factories in Calgary and Edmonton."

Question 8

Use the table below to answer the following questions.
Table 26.3.3
  
-Refer to Table 26.3.3.When the economy is at its short-run macroeconomic equilibrium,

Accepted Answer

A) the unemployment rate is below its natural rate. 
B) the unemployment rate is above its natural rate. 
C) the money wage rate will rise. 
D) the long-run aggregate supply curve will shift eventually shift leftward to return to full employment. 
E) potential GDP will eventually increase. 
A) the unemployment rate is below its natural rate. 
B) the unemployment rate is above its natural rate. 
C) the money wage rate will rise. 
D) the long-run aggregate supply curve will shift eventually shift leftward to return to full employment. 
E) potential GDP will eventually increase.

Question 9

Use the figure below to answer the following question.
   
Figure 26.3.4
-If real GDP is less than potential GDP,we would expect

Accepted Answer

A) the money wage rate to fall. 
B) the money wage rate to rise. 
C) potential GDP to increase. 
D) potential GDP to decrease. 
E) A and C. 
A) the money wage rate to fall. 
B) the money wage rate to rise. 
C) potential GDP to increase. 
D) potential GDP to decrease. 
E) A and C.

Question 10

Use the figure below to answer the following questions.
   
Figure 26.3.5
-Refer to Figure 26.3.5.If the aggregate demand curve is AD?,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 11

We observe a decrease in the price level and an increase in real GDP.Which of the following is a possible explanation?

Accepted Answer

A) a decrease in the quantity of money 
B) a decrease in expected future income 
C) an increase in factor prices 
D) an increase in the quantity of capital 
E) an increase in expected future profits 
A) a decrease in the quantity of money 
B) a decrease in expected future income 
C) an increase in factor prices 
D) an increase in the quantity of capital 
E) an increase in expected future profits

Question 12

Which one of the following newspaper quotations describes a shift of only the SAS curve?

Accepted Answer

A) "The decrease in consumer spending may lead to a recession." 
B) "The increase in consumer spending is expected to lead to inflation, without any increase in real GDP." 
C) "Recent higher wage settlements are expected to cause higher inflation this year." 
D) "Growth has been unusually high the last few years due to more women entering the work force." 
E) "The recent tornadoes destroyed many factories in Calgary and Edmonton." 
A) "The decrease in consumer spending may lead to a recession." 
B) "The increase in consumer spending is expected to lead to inflation, without any increase in real GDP." 
C) "Recent higher wage settlements are expected to cause higher inflation this year." 
D) "Growth has been unusually high the last few years due to more women entering the work force." 
E) "The recent tornadoes destroyed many factories in Calgary and Edmonton."

Question 13

Use the figure below to answer the following questions.
   
Figure 26.3.5
-Refer to Figure 26.3.5.At point B the economy has

Accepted Answer

A) an inflationary gap with real GDP in excess of potential GDP. 
B) an inflationary gap with real GDP less than potential GDP. 
C) a recessionary gap with real GDP in excess of potential GDP. 
D) a recessionary gap with real GDP less than potential GDP. 
E) neither an inflationary gap nor a recessionary gap. 
A) an inflationary gap with real GDP in excess of potential GDP. 
B) an inflationary gap with real GDP less than potential GDP. 
C) a recessionary gap with real GDP in excess of potential GDP. 
D) a recessionary gap with real GDP less than potential GDP. 
E) neither an inflationary gap nor a recessionary gap.

Question 14

Use the figure below to answer the following questions.
   
Figure 26.3.1
-Refer to Figure 26.3.1.Econoworld is at its short-run macroeconomic equilibrium.There is a difference between ________ real GDP and potential GDP of $________ billion.

Accepted Answer

A) above full-employment equilibrium;40 
B) above full-employment equilibrium;20 
C) below full-employment equilibrium;40 
D) below full-employment equilibrium;20 
E) full-employment equilibrium;0 
A) above full-employment equilibrium;40 
B) above full-employment equilibrium;20 
C) below full-employment equilibrium;40 
D) below full-employment equilibrium;20 
E) full-employment equilibrium;0

Question 15

A ________ macroeconomist believes that business cycle fluctuations are the efficient responses of a well-functioning market economy that is bombarded by shocks that arise from the uneven pace of technological change.
A ________ macroeconomist believes that the short-run aggregate supply curve is horizontal at a fixed price level.

Accepted Answer

A) new classical;monetarist 
B) classical;monetarist 
C) Keynesian;new Keynesian 
D) new classical;new Keynesian 
E) monetarist;new classical 
A) new classical;monetarist 
B) classical;monetarist 
C) Keynesian;new Keynesian 
D) new classical;new Keynesian 
E) monetarist;new classical

Question 16

Short-run macroeconomic equilibrium always occurs when the

Accepted Answer

A) economy is at full employment. 
B) economy is below full employment. 
C) economy is above full employment. 
D) quantity of real GDP demanded equals the quantity of real GDP supplied. 
E) AD curve intersects the LAS curve. 
A) economy is at full employment. 
B) economy is below full employment. 
C) economy is above full employment. 
D) quantity of real GDP demanded equals the quantity of real GDP supplied. 
E) AD curve intersects the LAS curve.

Question 17

A vertical long-run aggregate supply curve indicates that

Accepted Answer

A) an increase in the price level will not expand an economy's output in the long run. 
B) output rates greater than the long-run output rate are unattainable. 
C) an increase in the price level will permit the economy to achieve a higher level of output. 
D) an increase in the price level will increase technological change and economic growth. 
E) the long-run aggregate supply curve never shifts. 
A) an increase in the price level will not expand an economy's output in the long run. 
B) output rates greater than the long-run output rate are unattainable. 
C) an increase in the price level will permit the economy to achieve a higher level of output. 
D) an increase in the price level will increase technological change and economic growth. 
E) the long-run aggregate supply curve never shifts.

Question 18

Which of the following situations illustrates how fiscal policy can influence aggregate demand?

Accepted Answer

A) The Bank of Canada raises interest rates so people plan to buy less consumer durables.As a result, the aggregate demand curve shifts leftward. 
B) Investors, anticipating an erosion of financial wealth due to inflation, decide to save more.As a result, aggregate demand decreases. 
C) The government reduces the goods and services tax.As a result, consumption expenditure increases and aggregate demand increases. 
D) The exchange rate value of the Canadian dollar rises.As a result, people living near the U.S.-Canada border increase their imports of goods and net exports decrease. 
E) Both A and C are examples of fiscal policy. 
A) The Bank of Canada raises interest rates so people plan to buy less consumer durables.As a result, the aggregate demand curve shifts leftward. 
B) Investors, anticipating an erosion of financial wealth due to inflation, decide to save more.As a result, aggregate demand decreases. 
C) The government reduces the goods and services tax.As a result, consumption expenditure increases and aggregate demand increases. 
D) The exchange rate value of the Canadian dollar rises.As a result, people living near the U.S.-Canada border increase their imports of goods and net exports decrease. 
E) Both A and C are examples of fiscal policy.

Question 19

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.There is

Accepted Answer

A) an inflationary gap equal to $100 billion. 
B) an inflationary gap equal to $50 billion. 
C) a recessionary gap equal to $50 billion. 
D) a recessionary gap equal to $100 billion. 
E) neither an inflationary nor a recessionary gap because the economy is at full employment. 
A) an inflationary gap equal to $100 billion. 
B) an inflationary gap equal to $50 billion. 
C) a recessionary gap equal to $50 billion. 
D) a recessionary gap equal to $100 billion. 
E) neither an inflationary nor a recessionary gap because the economy is at full employment.

Question 20

Use the figure below to answer the following question.
   
Figure 26.3.4
-If real GDP is greater than potential GDP,we would expect

Accepted Answer

A) the money wage rate to fall. 
B) the money wage rate to rise. 
C) potential GDP to increase. 
D) potential GDP to decrease. 
E) A and C. 
A) the money wage rate to fall. 
B) the money wage rate to rise. 
C) potential GDP to increase. 
D) potential GDP to decrease. 
E) A and C.

Exam 26: Aggregate Supply and Aggregate Demand

The short-run aggregate supply curve is the relationship between the quantity of real GDP supplied and

An increase in oil prices to a country that is a net importer of oil shifts

The short-run aggregate supply curve indicates

Which one of the following shifts the aggregate demand curve leftward?

Everything else remaining the same,which one of the following increases aggregate demand?

Which one of the following newspaper quotations describes a rightward shift of the LAS curve?

Use the table below to answer the following questions. Table 26.3.3 -Refer to Table 26.3.3.When the economy is at its short-run macroeconomic equilibrium,

Use the figure below to answer the following question. Figure 26.3.4 -If real GDP is less than potential GDP,we would expect

Use the figure below to answer the following questions. Figure 26.3.5 -Refer to Figure 26.3.5.If the aggregate demand curve is AD?,real GDP is

We observe a decrease in the price level and an increase in real GDP.Which of the following is a possible explanation?

Which one of the following newspaper quotations describes a shift of only the SAS curve?

Use the figure below to answer the following questions. Figure 26.3.5 -Refer to Figure 26.3.5.At point B the economy has

Use the figure below to answer the following questions. Figure 26.3.1 -Refer to Figure 26.3.1.Econoworld is at its short-run macroeconomic equilibrium.There is a difference between ________ real GDP and potential GDP of $________ billion.

Short-run macroeconomic equilibrium always occurs when the

A vertical long-run aggregate supply curve indicates that

Which of the following situations illustrates how fiscal policy can influence aggregate demand?

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.There is

Use the figure below to answer the following question. Figure 26.3.4 -If real GDP is greater than potential GDP,we would expect

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 figure below to answer the following questions. Figure 26.3.1 -Refer to Figure 26.3.1.Econoworld is at its short-run macroeconomic equilibrium.There is a difference between real GDP and potential GDP of $ billion.