Question 1

The aggregate demand multiplier effect says that an initial increase in expenditure plans leads to an induced

Accepted Answer

A)  increase in production expenditure. 
B)  increase in exports. 
C)  increase in consumption expenditure. 
D)  decrease in the price level. 
E)  increase in government expenditures on goods and services. 
A)  increase in production expenditure. 
B)  increase in exports. 
C)  increase in consumption expenditure. 
D)  decrease in the price level. 
E)  increase in government expenditures on goods and services.

Question 2

Along the aggregate supply curve, the quantity of real GDP supplied increases when the price level rises because

Accepted Answer

A)  the real wage rate rises. 
B)  the demand for the goods and services increases. 
C)  the real wage rate and profits both fall. 
D)  profits decrease. 
E)  the real wage rate falls. 
A)  the real wage rate rises. 
B)  the demand for the goods and services increases. 
C)  the real wage rate and profits both fall. 
D)  profits decrease. 
E)  the real wage rate falls.

Question 3

The table gives the aggregate demand and aggregate supply schedules for a nation.
-The table above gives data for the nation of Pearl, a small island in the South Pacific. If aggregate demand increases so that the quantity of real GDP demanded is $6 billion more at each price level, the new equilibrium real GDP is ________, and the nation is now experiencing a(n) ________.

Accepted Answer

A)  $22 billion; recessionary gap 
B)  $28 billion; recessionary gap 
C)  $28 billion; inflationary gap 
D)  $25 billion; equilibrium 
E)  $22 billion; inflationary gap 
A)  $22 billion; recessionary gap 
B)  $28 billion; recessionary gap 
C)  $28 billion; inflationary gap 
D)  $25 billion; equilibrium 
E)  $22 billion; inflationary gap

Question 4

The aggregate supply curve is a(n) ________ curve because it represents the relationship between price level and the quantity of real GDP supplied, two items that are ________ correlated.

Accepted Answer

A)  downward-sloping; negatively 
B)  vertical; not 
C)  upward-sloping; negatively 
D)  downward-sloping; positively 
E)  upward-sloping; positively 
A)  downward-sloping; negatively 
B)  vertical; not 
C)  upward-sloping; negatively 
D)  downward-sloping; positively 
E)  upward-sloping; positively

Question 5

All of the following shift the aggregate demand curve to the right EXCEPT

Accepted Answer

A)  an increase in taxes. 
B)  an increase in expected future profit. 
C)  an expansion of the global economy. 
D)  an increase in government expenditure. 
E)  an increase in foreign income. 
A)  an increase in taxes. 
B)  an increase in expected future profit. 
C)  an expansion of the global economy. 
D)  an increase in government expenditure. 
E)  an increase in foreign income.

Question 6

The aggregate supply curve shifts rightward when

Accepted Answer

A)  the money wage rate falls. 
B)  government purchases increase. 
C)  potential GDP decreases. 
D)  the money wage rate rises. 
E)  income taxes increase. 
A)  the money wage rate falls. 
B)  government purchases increase. 
C)  potential GDP decreases. 
D)  the money wage rate rises. 
E)  income taxes increase.

Question 7

-In the figure above, the economy is at an equilibrium with real GDP of $16 trillion and a price level of 110. As the economy moves toward its ultimate equilibrium, the ________ curve shifts ________ because ________.

Accepted Answer

A)  aggregate supply; rightward; the money wage rate falls 
B)  potential GDP; leftward; the money wage rate falls 
C)  aggregate supply; leftward; the money wage rate rises 
D)  aggregate demand; rightward; the money wage rate falls 
E)  aggregate demand; leftward; the money wage rate rises 
A)  aggregate supply; rightward; the money wage rate falls 
B)  potential GDP; leftward; the money wage rate falls 
C)  aggregate supply; leftward; the money wage rate rises 
D)  aggregate demand; rightward; the money wage rate falls 
E)  aggregate demand; leftward; the money wage rate rises

Question 8

At a price level of 100, John has savings equal to $20,000. If the price level increases to 130, the buying power of John's savings is approximately

Accepted Answer

A)  $15,400. 
B)  $12,780. 
C)  $26,000. 
D)  $30,000. 
E)  $20,000. 
A)  $15,400. 
B)  $12,780. 
C)  $26,000. 
D)  $30,000. 
E)  $20,000.

Question 9

-The change reflected in the above figure might be a result of

Accepted Answer

A)  a fall in the price level. 
B)  an increase in the quantity of labour. 
C)  a decrease in the money prices of resources other than labour. 
D)  a decrease in the quantity of capital. 
E)  a rise in the money wage rate. 
A)  a fall in the price level. 
B)  an increase in the quantity of labour. 
C)  a decrease in the money prices of resources other than labour. 
D)  a decrease in the quantity of capital. 
E)  a rise in the money wage rate.

Question 10

An increase in the price level leads to

Accepted Answer

A)  neither a movement along the aggregate supply curve nor a shift of the aggregate supply curve. 
B)  a downward movement along the aggregate supply curve. 
C)  a leftward shift of the aggregate supply curve. 
D)  a rightward shift of the aggregate supply curve. 
E)  an upward movement along the aggregate supply curve. 
A)  neither a movement along the aggregate supply curve nor a shift of the aggregate supply curve. 
B)  a downward movement along the aggregate supply curve. 
C)  a leftward shift of the aggregate supply curve. 
D)  a rightward shift of the aggregate supply curve. 
E)  an upward movement along the aggregate supply curve.

Question 11

Demand-pull inflation results from continually increasing the quantity of money, which leads to continually

Accepted Answer

A)  decreasing aggregate demand. 
B)  decreasing potential GDP. 
C)  increasing aggregate supply. 
D)  increasing potential GDP. 
E)  increasing aggregate demand. 
A)  decreasing aggregate demand. 
B)  decreasing potential GDP. 
C)  increasing aggregate supply. 
D)  increasing potential GDP. 
E)  increasing aggregate demand.

Question 12

Which of the following changes aggregate supply and shifts the aggregate supply curve?
i. Change in the price level
ii. Change in potential GDP
iii. Change in the money wage rate

Accepted Answer

A)  i only 
B)  ii only 
C)  iii only 
D)  ii and iii 
E)  i, ii and iii 
A)  i only 
B)  ii only 
C)  iii only 
D)  ii and iii 
E)  i, ii and iii

Question 13

Which of the following shifts the aggregate supply curve rightward?
i. The money wage rate rises.
ii. Potential GDP increases.
iii. Government expenditure on goods and services increases.

Accepted Answer

A)  i only 
B)  ii only 
C)  iii only 
D)  ii and iii 
E)  i, ii and iii 
A)  i only 
B)  ii only 
C)  iii only 
D)  ii and iii 
E)  i, ii and iii

Question 14

The main sources of cost-push inflation are increases in

Accepted Answer

A)  the real wage rate and the price of raw materials. 
B)  the quantity of money and the real wage rate. 
C)  the money wage rate and aggregate demand. 
D)  government expenditure and the quantity of money. 
E)  the money wage rate and the price of raw materials. 
A)  the real wage rate and the price of raw materials. 
B)  the quantity of money and the real wage rate. 
C)  the money wage rate and aggregate demand. 
D)  government expenditure and the quantity of money. 
E)  the money wage rate and the price of raw materials.

Question 15

Aggregate demand ________ if the expected inflation rate increases because ________.

Accepted Answer

A)  does not change; inflation does not affect the aggregate demand curve 
B)  decreases; people wait for the exchange rates to change before making purchases 
C)  increases; people want to make purchases now before the price of goods and services begin to increase 
D)  increases; people expect to experience increases in the cost of living as the inflation begins 
E)  decreases; people want to wait for the price of goods and services begin to decrease 
A)  does not change; inflation does not affect the aggregate demand curve 
B)  decreases; people wait for the exchange rates to change before making purchases 
C)  increases; people want to make purchases now before the price of goods and services begin to increase 
D)  increases; people expect to experience increases in the cost of living as the inflation begins 
E)  decreases; people want to wait for the price of goods and services begin to decrease

Question 16

An increase in ________ increases potential GDP and ________ aggregate supply.

Accepted Answer

A)  the money wage rate; decreases 
B)  technology; decreases 
C)  the money price of oil; decreases 
D)  technology; increases 
E)  the money wage rate; increases 
A)  the money wage rate; decreases 
B)  technology; decreases 
C)  the money price of oil; decreases 
D)  technology; increases 
E)  the money wage rate; increases

Question 17

A recessionary gap occurs when ________ so that real GDP is ________ potential GDP.

Accepted Answer

A)  aggregate supply decreases; less than 
B)  aggregate demand increases; greater than 
C)  aggregate supply increases; less than 
D)  aggregate demand decreases; less than 
E)  potential GDP decreases; greater than 
A)  aggregate supply decreases; less than 
B)  aggregate demand increases; greater than 
C)  aggregate supply increases; less than 
D)  aggregate demand decreases; less than 
E)  potential GDP decreases; greater than

Question 18

If the price level increases from 110.0 to 115.0, the quantity of

Accepted Answer

A)  potential GDP will decrease. 
B)  potential GDP will increase. 
C)  real GDP demanded will increase. 
D)  real GDP supplied will decrease. 
E)  real GDP supplied will increase. 
A)  potential GDP will decrease. 
B)  potential GDP will increase. 
C)  real GDP demanded will increase. 
D)  real GDP supplied will decrease. 
E)  real GDP supplied will increase.

Question 19

The aggregate supply curve shows the relationship between

Accepted Answer

A)  the quantity of real GDP supplied and the price level. 
B)  potential GDP and real GDP. 
C)  the quantity of real GDP supplied and the interest rate. 
D)  potential GDP and the aggregate demand curve. 
E)  potential GDP and the price level. 
A)  the quantity of real GDP supplied and the price level. 
B)  potential GDP and real GDP. 
C)  the quantity of real GDP supplied and the interest rate. 
D)  potential GDP and the aggregate demand curve. 
E)  potential GDP and the price level.

Question 20

At a peak in the business cycle, the macroeconomic equilibrium is ________ the level of potential real GDP.

Accepted Answer

A)  greater than 
B)  less than 
C)  equal to 
D)  falling below 
E)  None of the above answers is always correct because the relationship depends on whether the previous phase of the business cycle had been a recession or an expansion. 
A)  greater than 
B)  less than 
C)  equal to 
D)  falling below 
E)  None of the above answers is always correct because the relationship depends on whether the previous phase of the business cycle had been a recession or an expansion.

The aggregate demand multiplier effect says that an initial increase in expenditure plans leads to an induced

Along the aggregate supply curve, the quantity of real GDP supplied increases when the price level rises because

The aggregate supply curve is a(n) curve because it represents the relationship between price level and the quantity of real GDP supplied, two items that are correlated.

All of the following shift the aggregate demand curve to the right EXCEPT

The aggregate supply curve shifts rightward when

-In the figure above, the economy is at an equilibrium with real GDP of $16 trillion and a price level of 110. As the economy moves toward its ultimate equilibrium, the curve shifts because .

At a price level of 100, John has savings equal to $20,000. If the price level increases to 130, the buying power of John's savings is approximately

-The change reflected in the above figure might be a result of

An increase in the price level leads to

Demand-pull inflation results from continually increasing the quantity of money, which leads to continually

Which of the following changes aggregate supply and shifts the aggregate supply curve? i. Change in the price level ii. Change in potential GDP iii. Change in the money wage rate

Which of the following shifts the aggregate supply curve rightward? i. The money wage rate rises. ii. Potential GDP increases. iii. Government expenditure on goods and services increases.

The main sources of cost-push inflation are increases in

Aggregate demand if the expected inflation rate increases because .

An increase in increases potential GDP and aggregate supply.

A recessionary gap occurs when so that real GDP is potential GDP.

If the price level increases from 110.0 to 115.0, the quantity of

The aggregate supply curve shows the relationship between

At a peak in the business cycle, the macroeconomic equilibrium is ________ the level of potential real GDP.

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

The aggregate demand multiplier effect says that an initial increase in expenditure plans leads to an induced

Along the aggregate supply curve, the quantity of real GDP supplied increases when the price level rises because

The aggregate supply curve is a(n) ________ curve because it represents the relationship between price level and the quantity of real GDP supplied, two items that are ________ correlated.

All of the following shift the aggregate demand curve to the right EXCEPT

The aggregate supply curve shifts rightward when

-In the figure above, the economy is at an equilibrium with real GDP of $16 trillion and a price level of 110. As the economy moves toward its ultimate equilibrium, the ________ curve shifts ________ because ________.

At a price level of 100, John has savings equal to $20,000. If the price level increases to 130, the buying power of John's savings is approximately

-The change reflected in the above figure might be a result of

An increase in the price level leads to

Demand-pull inflation results from continually increasing the quantity of money, which leads to continually

Which of the following changes aggregate supply and shifts the aggregate supply curve? i. Change in the price level ii. Change in potential GDP iii. Change in the money wage rate

Which of the following shifts the aggregate supply curve rightward? i. The money wage rate rises. ii. Potential GDP increases. iii. Government expenditure on goods and services increases.

The main sources of cost-push inflation are increases in

Aggregate demand ________ if the expected inflation rate increases because ________.

An increase in ________ increases potential GDP and ________ aggregate supply.

A recessionary gap occurs when ________ so that real GDP is ________ potential GDP.

If the price level increases from 110.0 to 115.0, the quantity of

The aggregate supply curve shows the relationship between

At a peak in the business cycle, the macroeconomic equilibrium is ________ the level of potential real GDP.

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

The aggregate supply curve is a(n) curve because it represents the relationship between price level and the quantity of real GDP supplied, two items that are correlated.

-In the figure above, the economy is at an equilibrium with real GDP of $16 trillion and a price level of 110. As the economy moves toward its ultimate equilibrium, the curve shifts because .

Aggregate demand if the expected inflation rate increases because .

An increase in increases potential GDP and aggregate supply.

A recessionary gap occurs when so that real GDP is potential GDP.