Question 1

The aggregate demand curve shows the ________ relationship between the price level and ________.

Accepted Answer

A) negative; the quantity of real GDP demanded 
B) positive; the quantity of real GDP demanded 
C) positive; aggregate labour demand 
D) negative; aggregate labour demanded 
A) negative; the quantity of real GDP demanded 
B) positive; the quantity of real GDP demanded 
C) positive; aggregate labour demand 
D) negative; aggregate labour demanded

Question 2

________ economists believe that the economy is self- regulating and will be at full employment as long as monetary policy is not erratic.

Accepted Answer

A) Classical 
B) Keynesian 
C) Monetarist 
D) All 
A) Classical 
B) Keynesian 
C) Monetarist 
D) All

Question 3

In the short run, real GDP can be greater than or less than potential GDP because in the short run the

Accepted Answer

A) quantity of capital is fixed. 
B) money wage rate is fixed. 
C) price level is fixed. 
D) full- employment level of employment is fixed. 
A) quantity of capital is fixed. 
B) money wage rate is fixed. 
C) price level is fixed. 
D) full- employment level of employment is fixed.

Question 4

Full- employment equilibrium occurs

Accepted Answer

A) when potential GDP exceeds real GDP. 
B) when real GDP exceeds potential GDP. 
C) when real GDP equals potential GDP. 
D) as a result of an increase in long- run aggregate supply. 
A) when potential GDP exceeds real GDP. 
B) when real GDP exceeds potential GDP. 
C) when real GDP equals potential GDP. 
D) as a result of an increase in long- run aggregate supply.

Question 5

An increase in aggregate demand is shown by a

Accepted Answer

A) rightward shift of the AD curve. 
B) movement downward along the AD curve. 
C) movement upward along the AD curve. 
D) leftward shift of the AD curve. 
A) rightward shift of the AD curve. 
B) movement downward along the AD curve. 
C) movement upward along the AD curve. 
D) leftward shift of the AD curve.

Question 6

The short- run aggregate supply curve

Accepted Answer

A) is vertical. 
B) is horizontal. 
C) has a negative slope. 
D) has a positive slope. 
A) is vertical. 
B) is horizontal. 
C) has a negative slope. 
D) has a positive slope.

Question 7

A change in________creates a movement along the aggregate demand curve but does not shift the aggregate demand curve.

Accepted Answer

A) the price level 
B) fiscal policy 
C) tax rates 
D) None of the above because they all shift the aggregate demand curve. 
A) the price level 
B) fiscal policy 
C) tax rates 
D) None of the above because they all shift the aggregate demand curve.

Question 8

-In the above figure, the short- run aggregate supply curve is SAS1. If the money wage rate increases, there is

Accepted Answer

A) a shift to SAS2. 
B) a shift to SAS0. 
C) an upward movement along SAS1. 
D) a downward movement along SAS1. 
A) a shift to SAS2. 
B) a shift to SAS0. 
C) an upward movement along SAS1. 
D) a downward movement along SAS1.

Question 9

According to the wealth effect, if real wealth decreases then people

Accepted Answer

A) decrease their consumption expenditure only if their nominal wealth also decreases. 
B) do not respond if their nominal wealth does not change. 
C) decrease their consumption expenditure. 
D) increase their consumption expenditure. 
A) decrease their consumption expenditure only if their nominal wealth also decreases. 
B) do not respond if their nominal wealth does not change. 
C) decrease their consumption expenditure. 
D) increase their consumption expenditure.

Question 10

An increase in foreign incomes

Accepted Answer

A) decreases the aggregate quantity demanded in Australia. 
B) increases aggregate demand in Australia. 
C) decreases aggregate demand in Australia. 
D) increases the aggregate quantity demanded in Australia. 
A) decreases the aggregate quantity demanded in Australia. 
B) increases aggregate demand in Australia. 
C) decreases aggregate demand in Australia. 
D) increases the aggregate quantity demanded in Australia.

Question 11

When talking about aggregate supply, it is necessary to

Accepted Answer

A) distinguish between long- run full employment and short- run full employment. 
B) focus on the short run. 
C) focus on the long run. 
D) distinguish between long- run aggregate supply and short- run aggregate supply. 
A) distinguish between long- run full employment and short- run full employment. 
B) focus on the short run. 
C) focus on the long run. 
D) distinguish between long- run aggregate supply and short- run aggregate supply.

Question 12

Which of the following shifts the aggregate demand curve rightward?

Accepted Answer

A) An increase in investment 
B) A decrease in government expenditure on goods and services 
C) A decrease in consumption 
D) A decrease in net exports 
A) An increase in investment 
B) A decrease in government expenditure on goods and services 
C) A decrease in consumption 
D) A decrease in net exports

Question 13

-The curve labelled A in the above figure will shift rightward when

Accepted Answer

A) technology increases. 
B) the price level falls. 
C) the population falls. 
D) the price level rises. 
A) technology increases. 
B) the price level falls. 
C) the population falls. 
D) the price level rises.

Question 14

-In the figure above, the economy is at point A when the price level rises to 120. Money wage rates and other resource prices remain constant. Firms are willing to supply output equal to

Accepted Answer

A) $13.0 billion. 
B) $12.5 billion. 
C) $13.5 billion. 
D) None of the above answers is correct. 
A) $13.0 billion. 
B) $12.5 billion. 
C) $13.5 billion. 
D) None of the above answers is correct.

Question 15

The AD curve slopes

Accepted Answer

A) upward due to the price and substitution effects. 
B) downward due to the wealth and price effects. 
C) upward due to the wealth and substitution effects. 
D) downward due to the wealth and substitution effects. 
A) upward due to the price and substitution effects. 
B) downward due to the wealth and price effects. 
C) upward due to the wealth and substitution effects. 
D) downward due to the wealth and substitution effects.

Question 16

Moving upward along the SAS results in a ________ in the price level and ________ in real GDP.

Accepted Answer

A) rise; an increase 
B) fall; an increase 
C) rise; a decrease 
D) fall; a decrease 
A) rise; an increase 
B) fall; an increase 
C) rise; a decrease 
D) fall; a decrease

Question 17

The short- run aggregate supply curve shifts when
I. the full- employment quantity of capital changes.
II. technology advances.

Accepted Answer

A) I only 
B) II only 
C) Neither I nor II 
D) Both I and II 
A) I only 
B) II only 
C) Neither I nor II 
D) Both I and II

Question 18

The SAS curve shifts if there is a change in

Accepted Answer

A) the price level. 
B) nominal GDP. 
C) potential GDP. 
D) real GDP. 
A) the price level. 
B) nominal GDP. 
C) potential GDP. 
D) real GDP.

Question 19

-In the above figure, which movement illustrates the impact of a constant price level and a rising money wage rate?

Accepted Answer

A) E to J 
B) E to I 
C) E to H 
D) E to F 
A) E to J 
B) E to I 
C) E to H 
D) E to F

Question 20

There are several reasons why the aggregate demand curve is downward- sloping. Which of the following correctly describes one of these explanations?

Accepted Answer

A) A fall in the price level, holding foreign prices and the exchange rate constant, increases net exports. 
B) A rise in the price level raises the purchasing power of wealth and increases desired consumption. 
C) A rise in the price level lowers the interest rate and increases investment spending. 
D) A rise in the price level raises interest rates and increases investment spending. 
A) A fall in the price level, holding foreign prices and the exchange rate constant, increases net exports. 
B) A rise in the price level raises the purchasing power of wealth and increases desired consumption. 
C) A rise in the price level lowers the interest rate and increases investment spending. 
D) A rise in the price level raises interest rates and increases investment spending.

The aggregate demand curve shows the relationship between the price level and .

________ economists believe that the economy is self- regulating and will be at full employment as long as monetary policy is not erratic.

In the short run, real GDP can be greater than or less than potential GDP because in the short run the

Full- employment equilibrium occurs

An increase in aggregate demand is shown by a

The short- run aggregate supply curve

A change in________creates a movement along the aggregate demand curve but does not shift the aggregate demand curve.

-In the above figure, the short- run aggregate supply curve is SAS₁. If the money wage rate increases, there is

According to the wealth effect, if real wealth decreases then people

An increase in foreign incomes

When talking about aggregate supply, it is necessary to

Which of the following shifts the aggregate demand curve rightward?

-The curve labelled A in the above figure will shift rightward when

-In the figure above, the economy is at point A when the price level rises to 120. Money wage rates and other resource prices remain constant. Firms are willing to supply output equal to

The AD curve slopes

Moving upward along the SAS results in a in the price level and in real GDP.

The short- run aggregate supply curve shifts when I. the full- employment quantity of capital changes. II. technology advances.

The SAS curve shifts if there is a change in

-In the above figure, which movement illustrates the impact of a constant price level and a rising money wage rate?

There are several reasons why the aggregate demand curve is downward- sloping. Which of the following correctly describes one of these explanations?

What Is Economics

The Economic Problem

Demand and Supply

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

Australian Macroeconomic Fluctuations

Fiscal Policy

Monetary Policy

Filters

Exam 24: Aggregate Demand and Aggregate Supply

The aggregate demand curve shows the ________ relationship between the price level and ________.

________ economists believe that the economy is self- regulating and will be at full employment as long as monetary policy is not erratic.

In the short run, real GDP can be greater than or less than potential GDP because in the short run the

Full- employment equilibrium occurs

An increase in aggregate demand is shown by a

The short- run aggregate supply curve

A change in________creates a movement along the aggregate demand curve but does not shift the aggregate demand curve.

-In the above figure, the short- run aggregate supply curve is SAS1. If the money wage rate increases, there is

According to the wealth effect, if real wealth decreases then people

An increase in foreign incomes

When talking about aggregate supply, it is necessary to

Which of the following shifts the aggregate demand curve rightward?

-The curve labelled A in the above figure will shift rightward when

-In the figure above, the economy is at point A when the price level rises to 120. Money wage rates and other resource prices remain constant. Firms are willing to supply output equal to

The AD curve slopes

Moving upward along the SAS results in a ________ in the price level and ________ in real GDP.

The short- run aggregate supply curve shifts when I. the full- employment quantity of capital changes. II. technology advances.

The SAS curve shifts if there is a change in

-In the above figure, which movement illustrates the impact of a constant price level and a rising money wage rate?

There are several reasons why the aggregate demand curve is downward- sloping. Which of the following correctly describes one of these explanations?

What Is Economics

The Economic Problem

Demand and Supply

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

Australian Macroeconomic Fluctuations

Fiscal Policy

Monetary Policy

Filters

The aggregate demand curve shows the relationship between the price level and .

-In the above figure, the short- run aggregate supply curve is SAS₁. If the money wage rate increases, there is

Moving upward along the SAS results in a in the price level and in real GDP.