Question 1

-Based on the figure above, the aggregate supply curve shifts rightward and the potential GDP line does NOT change when

Accepted Answer

A)  both the price level and money wage rate rise by the same proportion. 
B)  the price level falls. 
C)  the money wage rate falls. 
D)  the money wage rate rises. 
E)  the price level rises. 
A)  both the price level and money wage rate rise by the same proportion. 
B)  the price level falls. 
C)  the money wage rate falls. 
D)  the money wage rate rises. 
E)  the price level rises. C

Question 2

A rise in the money wage rate shifts the

Accepted Answer

A)  AS curve rightward. 
B)  AD curve rightward. 
C)  AD curve leftward. 
D)  potential GDP curve rightward. 
E)  AS curve leftward. 
A)  AS curve rightward. 
B)  AD curve rightward. 
C)  AD curve leftward. 
D)  potential GDP curve rightward. 
E)  AS curve leftward. E

Question 3

An increase in government expenditure on goods and services leads to

Accepted Answer

A)  the aggregate supply curve shifting rightward. 
B)  the aggregate demand curve shifting leftward. 
C)  the aggregate demand curve shifting rightward. 
D)  potential GDP increasing. 
E)  the aggregate supply curve shifting leftward. 
A)  the aggregate supply curve shifting rightward. 
B)  the aggregate demand curve shifting leftward. 
C)  the aggregate demand curve shifting rightward. 
D)  potential GDP increasing. 
E)  the aggregate supply curve shifting leftward. C

Question 4

-In the figure above, the shift in the aggregate demand curve from AD1 to AD3 could be the result of an increase in

Accepted Answer

A)  the price level. 
B)  foreign incomes. 
C)  the foreign exchange rate. 
D)  expected future income. 
E)  aggregate supply. 
A)  the price level. 
B)  foreign incomes. 
C)  the foreign exchange rate. 
D)  expected future income. 
E)  aggregate supply.

Question 5

If firms' expectations about the future become pessimistic so that they think future profits will be lower, then

Accepted Answer

A)  the quantity of real GDP demanded decreases, and there is a movement up along the AD curve. 
B)  aggregate demand decreases and the AD curve shifts leftward. 
C)  aggregate demand increases and the AD curve shifts rightward. 
D)  the aggregate demand curve does not shift, but potential GDP decreases. 
E)  the quantity of real GDP demanded increases, and there is a movement down along the AD curve. 
A)  the quantity of real GDP demanded decreases, and there is a movement up along the AD curve. 
B)  aggregate demand decreases and the AD curve shifts leftward. 
C)  aggregate demand increases and the AD curve shifts rightward. 
D)  the aggregate demand curve does not shift, but potential GDP decreases. 
E)  the quantity of real GDP demanded increases, and there is a movement down along the AD curve.

Question 6

If the Reserve Bank increases the quantity of money, then

Accepted Answer

A)  the quantity of real GDP demanded decreases and there is a movement up along the AD curve. 
B)  the quantity of real GDP demanded increases and there is a movement down along the AD curve. 
C)  both the aggregate demand curve and the aggregate supply curve shift leftward. 
D)  aggregate demand decreases and the AD curve shifts leftward. 
E)  aggregate demand increases and the AD curve shifts rightward. 
A)  the quantity of real GDP demanded decreases and there is a movement up along the AD curve. 
B)  the quantity of real GDP demanded increases and there is a movement down along the AD curve. 
C)  both the aggregate demand curve and the aggregate supply curve shift leftward. 
D)  aggregate demand decreases and the AD curve shifts leftward. 
E)  aggregate demand increases and the AD curve shifts rightward.

Question 7

Which of the following decreases aggregate demand and shifts the AD curve leftward?

Accepted Answer

A)  A tax cut 
B)  An increase in government expenditures on goods and services 
C)  A decrease in potential GDP 
D)  The Reserve Bank increasing the interest rate 
E)  An increase in the quantity of money 
A)  A tax cut 
B)  An increase in government expenditures on goods and services 
C)  A decrease in potential GDP 
D)  The Reserve Bank increasing the interest rate 
E)  An increase in the quantity of money

Question 8

-In the figure above, the shift in the aggregate demand curve from AD1 to AD3 could be the result of

Accepted Answer

A)  a decrease in the buying power of money. 
B)  an increased expectation of a recession that lowers the expected rate of profit from investment. 
C)  a decrease in the real interest rate. 
D)  a decrease in the foreign exchange rate. 
E)  an increase in the price level. 
A)  a decrease in the buying power of money. 
B)  an increased expectation of a recession that lowers the expected rate of profit from investment. 
C)  a decrease in the real interest rate. 
D)  a decrease in the foreign exchange rate. 
E)  an increase in the price level.

Question 9

Moving along the AS curve, when the price level increases, the

Accepted Answer

A)  real wage rate rises, and there is a decrease in the quantity of real GDP supplied. 
B)  nominal wage rate rises, and there is a decrease in the quantity of real GDP supplied. 
C)  real wage rate falls, and there is an increase in the quantity of real GDP supplied. 
D)  real wage rate rises, and there is an increase in the quantity of real GDP supplied. 
E)  nominal wage rate falls, and there is an increase in the quantity of real GDP supplied. 
A)  real wage rate rises, and there is a decrease in the quantity of real GDP supplied. 
B)  nominal wage rate rises, and there is a decrease in the quantity of real GDP supplied. 
C)  real wage rate falls, and there is an increase in the quantity of real GDP supplied. 
D)  real wage rate rises, and there is an increase in the quantity of real GDP supplied. 
E)  nominal wage rate falls, and there is an increase in the quantity of real GDP supplied.

Question 10

If demand-pull inflation occurs when the economy is already at potential GDP then, following the initial increase in aggregate demand, the

Accepted Answer

A)  potential GDP line shifts leftward. 
B)  AS curve shifts leftward. 
C)  AS curve shifts rightward. 
D)  potential GDP line shifts rightward. 
E)  None of the above is correct because demand-pull inflation shifts only the aggregate demand curve. 
A)  potential GDP line shifts leftward. 
B)  AS curve shifts leftward. 
C)  AS curve shifts rightward. 
D)  potential GDP line shifts rightward. 
E)  None of the above is correct because demand-pull inflation shifts only the aggregate demand curve.

Question 11

The real wage rate definitely falls if the money wage rate ________ and the price level ________.

Accepted Answer

A)  remains constant; falls 
B)  remains constant; rises 
C)  rises; rises 
D)  falls; falls 
E)  rises; falls 
A)  remains constant; falls 
B)  remains constant; rises 
C)  rises; rises 
D)  falls; falls 
E)  rises; falls

Question 12

In the short-run, an increase in the price of raw materials will ________ the price level and ________ real GDP.

Accepted Answer

A)  raise; increase 
B)  lower; increase 
C)  raise; decrease 
D)  raise; not change 
E)  lower; decrease 
A)  raise; increase 
B)  lower; increase 
C)  raise; decrease 
D)  raise; not change 
E)  lower; decrease

Question 13

During 2018, a country reports that its price level fell and the money wage rate did not change. These changes led to

Accepted Answer

A)  no change in the real wage rate and an increase in aggregate demand. 
B)  a lower real wage rate, lower profits, and a decrease in the quantity of real GDP supplied. 
C)  a higher real wage rate, higher profits, and an increase in the quantity of real GDP supplied. 
D)  a higher real wage rate, lower profits, and a decrease in the quantity of real GDP supplied. 
E)  a lower real wage rate, higher profits, and an increase in the quantity of real GDP supplied. 
A)  no change in the real wage rate and an increase in aggregate demand. 
B)  a lower real wage rate, lower profits, and a decrease in the quantity of real GDP supplied. 
C)  a higher real wage rate, higher profits, and an increase in the quantity of real GDP supplied. 
D)  a higher real wage rate, lower profits, and a decrease in the quantity of real GDP supplied. 
E)  a lower real wage rate, higher profits, and an increase in the quantity of real GDP supplied.

Question 14

-The aggregate demand curve in the figure above shifts rightward if

Accepted Answer

A)  potential GDP increases. 
B)  government expenditure decreases. 
C)  the money wage rate falls. 
D)  taxes are raised. 
E)  the Reserve Bank lowers the interest rate. 
A)  potential GDP increases. 
B)  government expenditure decreases. 
C)  the money wage rate falls. 
D)  taxes are raised. 
E)  the Reserve Bank lowers the interest rate.

Question 15

Which of the following does NOT affect potential GDP?

Accepted Answer

A)  The quantity of labour employed 
B)  The quantity of land and natural resources 
C)  The quantity of capital and human capital 
D)  The quantity of money 
E)  The amount of entrepreneurial talent available 
A)  The quantity of labour employed 
B)  The quantity of land and natural resources 
C)  The quantity of capital and human capital 
D)  The quantity of money 
E)  The amount of entrepreneurial talent available

Question 16

In a demand-pull inflation, money wage rates rise because

Accepted Answer

A)  a decrease in aggregate demand creates a labour surplus. 
B)  an increase in aggregate demand creates a labour shortage. 
C)  a decrease in aggregate demand creates a labour shortage. 
D)  an increase in aggregate demand creates a labour surplus. 
E)  an increase in aggregate supply creates a labour shortage. 
A)  a decrease in aggregate demand creates a labour surplus. 
B)  an increase in aggregate demand creates a labour shortage. 
C)  a decrease in aggregate demand creates a labour shortage. 
D)  an increase in aggregate demand creates a labour surplus. 
E)  an increase in aggregate supply creates a labour shortage.

Question 17

Which of the following factors could start a demand-pull inflation?

Accepted Answer

A)  A decrease in the money wage rate 
B)  An increase in the money wage rate 
C)  A decrease in government expenditure 
D)  An increase in the quantity of money 
E)  An increase in tax rates 
A)  A decrease in the money wage rate 
B)  An increase in the money wage rate 
C)  A decrease in government expenditure 
D)  An increase in the quantity of money 
E)  An increase in tax rates

Question 18

If the AD curve shifts rightward, then

Accepted Answer

A)  both the price level and real GDP will increase. 
B)  potential GDP increases. 
C)  the price level will increase, but no change will occur in real GDP. 
D)  both the price level and real GDP will decrease. 
E)  the price level will not change, but real GDP will increase. 
A)  both the price level and real GDP will increase. 
B)  potential GDP increases. 
C)  the price level will increase, but no change will occur in real GDP. 
D)  both the price level and real GDP will decrease. 
E)  the price level will not change, but real GDP will increase.

Question 19

-The aggregate demand curve in the figure above shifts rightward if

Accepted Answer

A)  potential GDP increases. 
B)  the money wage rate falls. 
C)  government expenditure decreases. 
D)  taxes are hiked. 
E)  the expected future profit increases so that investment increases. 
A)  potential GDP increases. 
B)  the money wage rate falls. 
C)  government expenditure decreases. 
D)  taxes are hiked. 
E)  the expected future profit increases so that investment increases.

Question 20

When the price level rises and increases the demand for money, the nominal interest rate ________ and the real interest rate ________.

Accepted Answer

A)  rises; rises 
B)  falls; falls 
C)  does not change; does not change 
D)  falls; rises 
E)  rises; falls 
A)  rises; rises 
B)  falls; falls 
C)  does not change; does not change 
D)  falls; rises 
E)  rises; falls

-Based on the figure above, the aggregate supply curve shifts rightward and the potential GDP line does NOT change when

A rise in the money wage rate shifts the

An increase in government expenditure on goods and services leads to

-In the figure above, the shift in the aggregate demand curve from AD₁ to AD3 could be the result of an increase in

If firms' expectations about the future become pessimistic so that they think future profits will be lower, then

If the Reserve Bank increases the quantity of money, then

Which of the following decreases aggregate demand and shifts the AD curve leftward?

-In the figure above, the shift in the aggregate demand curve from AD₁ to AD3 could be the result of

Moving along the AS curve, when the price level increases, the

If demand-pull inflation occurs when the economy is already at potential GDP then, following the initial increase in aggregate demand, the

The real wage rate definitely falls if the money wage rate and the price level .

In the short-run, an increase in the price of raw materials will the price level and real GDP.

During 2018, a country reports that its price level fell and the money wage rate did not change. These changes led to

-The aggregate demand curve in the figure above shifts rightward if

Which of the following does NOT affect potential GDP?

In a demand-pull inflation, money wage rates rise because

Which of the following factors could start a demand-pull inflation?

If the AD curve shifts rightward, then

-The aggregate demand curve in the figure above shifts rightward if

When the price level rises and increases the demand for money, the nominal interest rate and the real interest rate .

Getting Started

The Australian and Global Economies

The Economic Problem

Demand and Supply

GDP: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Economic Growth

Finance, Saving and Investment

Money, the Price Level and Inflation

Aggregate Expenditure Multiplier

The Short-Run Policy Tradeoff

Fiscal Policy

Monetary Policy

International Trade Policy

International Finance

Filters

Exam 11: Aggregate Supply and Aggregate Demand

-Based on the figure above, the aggregate supply curve shifts rightward and the potential GDP line does NOT change when

A rise in the money wage rate shifts the

An increase in government expenditure on goods and services leads to

-In the figure above, the shift in the aggregate demand curve from AD1 to AD3 could be the result of an increase in

If firms' expectations about the future become pessimistic so that they think future profits will be lower, then

If the Reserve Bank increases the quantity of money, then

Which of the following decreases aggregate demand and shifts the AD curve leftward?

-In the figure above, the shift in the aggregate demand curve from AD1 to AD3 could be the result of

Moving along the AS curve, when the price level increases, the

If demand-pull inflation occurs when the economy is already at potential GDP then, following the initial increase in aggregate demand, the

The real wage rate definitely falls if the money wage rate ________ and the price level ________.

In the short-run, an increase in the price of raw materials will ________ the price level and ________ real GDP.

During 2018, a country reports that its price level fell and the money wage rate did not change. These changes led to

-The aggregate demand curve in the figure above shifts rightward if

Which of the following does NOT affect potential GDP?

In a demand-pull inflation, money wage rates rise because

Which of the following factors could start a demand-pull inflation?

If the AD curve shifts rightward, then

-The aggregate demand curve in the figure above shifts rightward if

When the price level rises and increases the demand for money, the nominal interest rate ________ and the real interest rate ________.

Getting Started

The Australian and Global Economies

The Economic Problem

Demand and Supply

GDP: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Economic Growth

Finance, Saving and Investment

Money, the Price Level and Inflation

Aggregate Expenditure Multiplier

The Short-Run Policy Tradeoff

Fiscal Policy

Monetary Policy

International Trade Policy

International Finance

Filters

-In the figure above, the shift in the aggregate demand curve from AD₁ to AD3 could be the result of an increase in

-In the figure above, the shift in the aggregate demand curve from AD₁ to AD3 could be the result of

The real wage rate definitely falls if the money wage rate and the price level .

In the short-run, an increase in the price of raw materials will the price level and real GDP.

When the price level rises and increases the demand for money, the nominal interest rate and the real interest rate .