Question 1

Disposable income is aggregate income

Accepted Answer

A) minus taxes and benefits. 
B) minus taxes plus transfer payments. 
C) minus fixed expenses such as rent and utilities. 
D) plus transfer payments. 
E) minus taxes. 
A) minus taxes and benefits. 
B) minus taxes plus transfer payments. 
C) minus fixed expenses such as rent and utilities. 
D) plus transfer payments. 
E) minus taxes. B

Question 2

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 a below full-employment equilibrium.
(2) The actual unemployment rate equals the natural unemployment rate.

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 the natural unemployment rate is too high. 
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 the natural unemployment rate is too high. A

Question 3

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 A

Question 4

Figure 26.3.2
  
-Refer to Figure 26.3.2. If the economy of Mythlo automatically adjusts to long-run equilibrium, then

Accepted Answer

A) the price level rises to 90. 
B) real GDP is $600 billion. 
C) the actual unemployment rate exceeds the natural unemployment rate. 
D) potential GDP decreases. 
E) the SAS curve shifts rightward. 
A) the price level rises to 90. 
B) real GDP is $600 billion. 
C) the actual unemployment rate exceeds the natural unemployment rate. 
D) potential GDP decreases. 
E) the SAS curve shifts rightward.

Question 5

Which of the following statements about the Keynesian view of the macroeconomy is incorrect?

Accepted Answer

A) Technological change is the most significant influence on both aggregate demand and aggregate supply. 
B) To achieve and maintain full employment, active help from fiscal policy and monetary policy is required. 
C) Expectations are based on "animal spirits." 
D) The money wage rate is extremely sticky in the downward direction so there is no automatic mechanism for eliminating a recessionary gap. 
E) Expectations are the most significant influence on aggregate demand. 
A) Technological change is the most significant influence on both aggregate demand and aggregate supply. 
B) To achieve and maintain full employment, active help from fiscal policy and monetary policy is required. 
C) Expectations are based on "animal spirits." 
D) The money wage rate is extremely sticky in the downward direction so there is no automatic mechanism for eliminating a recessionary gap. 
E) Expectations are the most significant influence on aggregate demand.

Question 6

Canada's exports to the European Union boom. What is the effect on the quantity of real GDP demanded or aggregate demand in Canada?

Accepted Answer

A) The quantity of Canadian real GDP demanded increases. 
B) The quantity of Canadian real GDP demanded decreases. 
C) Canadian aggregate demand increases. 
D) Canadian aggregate demand decreases. 
E) There is no change to either the quantity of real GDP demanded or to aggregate demand. 
A) The quantity of Canadian real GDP demanded increases. 
B) The quantity of Canadian real GDP demanded decreases. 
C) Canadian aggregate demand increases. 
D) Canadian aggregate demand decreases. 
E) There is no change to either the quantity of real GDP demanded or to aggregate demand.

Question 7

The Canadian price level rises. This event

Accepted Answer

A) increases short-run aggregate supply. 
B) increases the quantity of real GDP supplied. 
C) decreases the quantity of real GDP supplied. 
D) increases long-run aggregate supply. 
E) decreases short-run aggregate supply. 
A) increases short-run aggregate supply. 
B) increases the quantity of real GDP supplied. 
C) decreases the quantity of real GDP supplied. 
D) increases long-run aggregate supply. 
E) decreases short-run aggregate supply.

Question 8

Full-employment equilibrium occurs when

Accepted Answer

A) aggregate demand equals short-run aggregate supply. 
B) all who are willing and able to work, are working. 
C) real GDP equals potential GDP. 
D) real GDP equals potential GDP and the wage level is set so that the GDP deflator equals 100. 
E) all who are willing and able to work are working, and the wage level is set so that the GDP deflator equals 100. 
A) aggregate demand equals short-run aggregate supply. 
B) all who are willing and able to work, are working. 
C) real GDP equals potential GDP. 
D) real GDP equals potential GDP and the wage level is set so that the GDP deflator equals 100. 
E) all who are willing and able to work are working, and the wage level is set so that the GDP deflator equals 100.

Question 9

The Canadian price level rises. What is the effect on the quantity of real GDP demanded or aggregate demand in Canada?

Accepted Answer

A) The quantity of Canadian real GDP demanded increases. 
B) The quantity of Canadian real GDP demanded decreases. 
C) Canadian aggregate demand increases. 
D) Canadian aggregate demand decreases. 
E) There is no change to either the quantity of real GDP demanded or to aggregate demand. 
A) The quantity of Canadian real GDP demanded increases. 
B) The quantity of Canadian real GDP demanded decreases. 
C) Canadian aggregate demand increases. 
D) Canadian aggregate demand decreases. 
E) There is no change to either the quantity of real GDP demanded or to aggregate demand.

Question 10

Table 26.3.1
   
41)Refer to Table 26.3.1. Consider the economy represented in the table. In short-run macroeconomic equilibrium, the price level is ________ and the level of real GDP is ________ billion.
-Refer to Table 26.3.1. Consider the economy represented in the table. The economy is in

Accepted Answer

A) a long-run equilibrium, and resource prices will not change. 
B) an above full-employment equilibrium, and factor prices will increase. 
C) an above full-employment equilibrium, and factor prices will decrease. 
D) a below full-employment equilibrium, and factor prices will decrease. 
E) a below full-employment equilibrium, and factor prices will increase. 
A) a long-run equilibrium, and resource prices will not change. 
B) an above full-employment equilibrium, and factor prices will increase. 
C) an above full-employment equilibrium, and factor prices will decrease. 
D) a below full-employment equilibrium, and factor prices will decrease. 
E) a below full-employment equilibrium, and factor prices will increase.

Question 11

Autoworkers agree to a cut in the nominal wage rate. This event ________ short-run aggregate supply and ________ long-run aggregate supply.

Accepted Answer

A) does not change; does not change 
B) decreases; does not change; 
C) increases; does not change; 
D) increases; increases 
E) decreases; does not change 
A) does not change; does not change 
B) decreases; does not change; 
C) increases; does not change; 
D) increases; increases 
E) decreases; does not change

Question 12

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) the expected future inflation rate to decrease. 
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) the expected future inflation rate to decrease.

Question 13

Which one of the following variables is not held constant along a given aggregate demand curve?

Accepted Answer

A) fiscal policy 
B) monetary policy 
C) the exchange rate 
D) expectations about inflation 
E) the price level 
A) fiscal policy 
B) monetary policy 
C) the exchange rate 
D) expectations about inflation 
E) the price level

Question 14

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 15

Which one of the following newspaper quotations describes a movement along an 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 labour 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 labour force." 
E) "The recent tornadoes destroyed many factories in Calgary and Edmonton."

Question 16

Figure 26.3.2
  
-Refer to Figure 26.3.2. In Mythlo there is a difference between the ________ equilibrium real GDP and potential GDP of ________ billion.

Accepted Answer

A) above full-employment; $50 
B) above full-employment; $25 
C) below full-employment; $50 
D) below full-employment; $25 
E) full employment; 0 
A) above full-employment; $50 
B) above full-employment; $25 
C) below full-employment; $50 
D) below full-employment; $25 
E) full employment; 0

Question 17

When an economy is operating on its long-run aggregate supply curve,

Accepted Answer

A) the actual inflation rate is greater than the anticipated inflation rate. 
B) the actual unemployment rate equals the natural unemployment rate. 
C) unemployment will fall to an unusually low rate that is not likely to last into the future. 
D) real GDP demanded exceeds real GDP supplied. 
E) inflation must be positive. 
A) the actual inflation rate is greater than the anticipated inflation rate. 
B) the actual unemployment rate equals the natural unemployment rate. 
C) unemployment will fall to an unusually low rate that is not likely to last into the future. 
D) real GDP demanded exceeds real GDP supplied. 
E) inflation must be positive.

Question 18

Table 26.3.1
   
41)Refer to Table 26.3.1. Consider the economy represented in the table. In short-run macroeconomic equilibrium, the price level is ________ and the level of real GDP is ________ billion.
-Refer to Table 26.3.1. Consider the economy represented in the table. In short-run macroeconomic equilibrium, the price level is ________ and the level of real GDP is ________ billion.

Accepted Answer

A) 120; $600 
B) 120; $500 
C) 125; $550 
D) 130; $600 
E) 130; $500 
A) 120; $600 
B) 120; $500 
C) 125; $550 
D) 130; $600 
E) 130; $500

Question 19

Consider an economy starting from a position of full employment. Which one of the following occurs as a result of an advance in technology?

Accepted Answer

A) The price level falls. 
B) Real GDP decreases in the short run. 
C) An inflationary gap arises. 
D) Factor prices rise in the long run, shifting the short-run aggregate supply curve leftward. 
E) The long-run aggregate supply curve shifts leftward to create the new long-run equilibrium. 
A) The price level falls. 
B) Real GDP decreases in the short run. 
C) An inflationary gap arises. 
D) Factor prices rise in the long run, shifting the short-run aggregate supply curve leftward. 
E) The long-run aggregate supply curve shifts leftward to create the new long-run equilibrium.

Question 20

Aggregate demand is the relationship between

Accepted Answer

A) real aggregate expenditure and real GDP. 
B) real income and real GDP. 
C) real prices and real GDP. 
D) the price level and the quantity of real GDP demanded. 
E) the price level and nominal GDP. 
A) real aggregate expenditure and real GDP. 
B) real income and real GDP. 
C) real prices and real GDP. 
D) the price level and the quantity of real GDP demanded. 
E) the price level and nominal GDP.

Disposable income is aggregate income

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 a below full-employment equilibrium. (2) The actual unemployment rate equals the natural unemployment rate.

Figure 26.3.5 -Refer to Figure 26.3.5. Potential GDP is

Figure 26.3.2 -Refer to Figure 26.3.2. If the economy of Mythlo automatically adjusts to long-run equilibrium, then

Which of the following statements about the Keynesian view of the macroeconomy is incorrect?

Canada's exports to the European Union boom. What is the effect on the quantity of real GDP demanded or aggregate demand in Canada?

The Canadian price level rises. This event

Full-employment equilibrium occurs when

The Canadian price level rises. What is the effect on the quantity of real GDP demanded or aggregate demand in Canada?

Table 26.3.1 41)Refer to Table 26.3.1. Consider the economy represented in the table. In short-run macroeconomic equilibrium, the price level is and the level of real GDP is billion. -Refer to Table 26.3.1. Consider the economy represented in the table. The economy is in

Autoworkers agree to a cut in the nominal wage rate. This event short-run aggregate supply and long-run aggregate supply.

If real GDP is greater than potential GDP, we would expect

Which one of the following variables is not held constant along a given aggregate demand curve?

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?

Which one of the following newspaper quotations describes a movement along an LAS curve?

Figure 26.3.2 -Refer to Figure 26.3.2. In Mythlo there is a difference between the equilibrium real GDP and potential GDP of billion.

When an economy is operating on its long-run aggregate supply curve,

Consider an economy starting from a position of full employment. Which one of the following occurs as a result of an advance in technology?

Aggregate demand is the relationship between

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 Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

Exam 26: Aggregate Supply and Aggregate Demand

Disposable income is aggregate income

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 a below full-employment equilibrium. (2) The actual unemployment rate equals the natural unemployment rate.

Figure 26.3.5 -Refer to Figure 26.3.5. Potential GDP is

Figure 26.3.2 -Refer to Figure 26.3.2. If the economy of Mythlo automatically adjusts to long-run equilibrium, then

Which of the following statements about the Keynesian view of the macroeconomy is incorrect?

Canada's exports to the European Union boom. What is the effect on the quantity of real GDP demanded or aggregate demand in Canada?

The Canadian price level rises. This event

Full-employment equilibrium occurs when

The Canadian price level rises. What is the effect on the quantity of real GDP demanded or aggregate demand in Canada?

Table 26.3.1 41)Refer to Table 26.3.1. Consider the economy represented in the table. In short-run macroeconomic equilibrium, the price level is ________ and the level of real GDP is ________ billion. -Refer to Table 26.3.1. Consider the economy represented in the table. The economy is in

Autoworkers agree to a cut in the nominal wage rate. This event ________ short-run aggregate supply and ________ long-run aggregate supply.

If real GDP is greater than potential GDP, we would expect

Which one of the following variables is not held constant along a given aggregate demand curve?

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?

Which one of the following newspaper quotations describes a movement along an LAS curve?

Figure 26.3.2 -Refer to Figure 26.3.2. In Mythlo there is a difference between the ________ equilibrium real GDP and potential GDP of ________ billion.

When an economy is operating on its long-run aggregate supply curve,

Consider an economy starting from a position of full employment. Which one of the following occurs as a result of an advance in technology?

Aggregate demand is the relationship between

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 Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

Table 26.3.1 41)Refer to Table 26.3.1. Consider the economy represented in the table. In short-run macroeconomic equilibrium, the price level is and the level of real GDP is billion. -Refer to Table 26.3.1. Consider the economy represented in the table. The economy is in

Autoworkers agree to a cut in the nominal wage rate. This event short-run aggregate supply and long-run aggregate supply.

Figure 26.3.2 -Refer to Figure 26.3.2. In Mythlo there is a difference between the equilibrium real GDP and potential GDP of billion.