Question 1

Everything else remaining the same, an increase in the quantity of money

Accepted Answer

A) shifts the aggregate demand curve rightward. 
B) shifts the aggregate demand curve leftward. 
C) shifts the aggregate supply curve leftward. 
D) shifts the aggregate supply curve rightward. 
E) creates a movement down along the aggregate demand curve. 
A) shifts the aggregate demand curve rightward. 
B) shifts the aggregate demand curve leftward. 
C) shifts the aggregate supply curve leftward. 
D) shifts the aggregate supply curve rightward. 
E) creates a movement down along the aggregate demand curve.

Question 2

If the price level rises, then the wealth effect leads to

Accepted Answer

A) an increase in real wealth, an increase in current consumption expenditure, and an increase in saving. 
B) an increase in real wealth, an increase in current consumption expenditure, and a decrease in saving. 
C) a decrease in real wealth, an increase in current consumption expenditure, and an increase in saving. 
D) a decrease in real wealth, an increase in current consumption expenditure, and a decrease in saving. 
E) a decrease in real wealth, a decrease in current consumption expenditure, and an increase in saving. 
A) an increase in real wealth, an increase in current consumption expenditure, and an increase in saving. 
B) an increase in real wealth, an increase in current consumption expenditure, and a decrease in saving. 
C) a decrease in real wealth, an increase in current consumption expenditure, and an increase in saving. 
D) a decrease in real wealth, an increase in current consumption expenditure, and a decrease in saving. 
E) a decrease in real wealth, a decrease in current consumption expenditure, and an increase in saving.

Question 3

Figure 26.3.2
  
-Refer to Figure 26.3.2. Short-run macroeconomic equilibrium real GDP in Mythlo is ________ billion.

Accepted Answer

A) $500 
B) $650 
C) $550 
D) $600 
E) $475 
A) $500 
B) $650 
C) $550 
D) $600 
E) $475

Question 4

Canadian firms build new pipelines across the nation. 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 5

Potential GDP is the level of real GDP at which

Accepted Answer

A) aggregate demand equals short-run aggregate supply. 
B) there is full employment. 
C) there is a recessionary gap. 
D) there is over-full employment. 
E) prices are sure to rise. 
A) aggregate demand equals short-run aggregate supply. 
B) there is full employment. 
C) there is a recessionary gap. 
D) there is over-full employment. 
E) prices are sure to rise.

Question 6

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 7

Figure 26.3.3
  
-Refer to Figure 26.3.3(a). You might expect the government to

Accepted Answer

A) do nothing except maintain the current equilibrium. 
B) cut government expenditure. 
C) increase government expenditure. 
D) pursue trade policies that reduce exports. 
E) raise taxes. 
A) do nothing except maintain the current equilibrium. 
B) cut government expenditure. 
C) increase government expenditure. 
D) pursue trade policies that reduce exports. 
E) raise taxes.

Question 8

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 9

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

Accepted Answer

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

Question 10

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) the exchange rate of the Canadian dollar to rise. 
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 exchange rate of the Canadian dollar to rise.

Question 11

Canadian businesses expect future profits to rise. Starting from a position of long-run equilibrium, what effect does this event have on Canada's economy in the short run?

Accepted Answer

A) Real GDP increases and the price level rises. 
B) Real GDP decreases and the price level falls. 
C) Real GDP increases and the price level falls. 
D) Real GDP decreases and the price level rises. 
E) There is no change in either real GDP or the price level. 
A) Real GDP increases and the price level rises. 
B) Real GDP decreases and the price level falls. 
C) Real GDP increases and the price level falls. 
D) Real GDP decreases and the price level rises. 
E) There is no change in either real GDP or the price level.

Question 12

The defining feature of the classical view of macroeconomics is that the economy is

Accepted Answer

A) rarely at full employment. 
B) driven by expectations called "animal spirits." 
C) self-regulating and always at full employment. 
D) constantly bombarded by shocks that arise from the uneven pace of technological change. 
E) the most significant influence on aggregate demand is expectations. 
A) rarely at full employment. 
B) driven by expectations called "animal spirits." 
C) self-regulating and always at full employment. 
D) constantly bombarded by shocks that arise from the uneven pace of technological change. 
E) the most significant influence on aggregate demand is expectations.

Question 13

An increase in the money wage rate shifts

Accepted Answer

A) both the SAS curve and the LAS curve rightward. 
B) both the SAS curve and the LAS curve leftward. 
C) the SAS curve leftward, but leaves the LAS curve unchanged. 
D) the LAS curve rightward, but leaves the SAS curve unchanged. 
E) the SAS curve rightward, but leaves the LAS curve unchanged. 
A) both the SAS curve and the LAS curve rightward. 
B) both the SAS curve and the LAS curve leftward. 
C) the SAS curve leftward, but leaves the LAS curve unchanged. 
D) the LAS curve rightward, but leaves the SAS curve unchanged. 
E) the SAS curve rightward, but leaves the LAS curve unchanged.

Question 14

Which of the following does not change aggregate demand?

Accepted Answer

A) an increase in expected future income 
B) a change in fiscal policy 
C) a change in monetary policy 
D) an advance in technology 
E) a rise in the exchange rate 
A) an increase in expected future income 
B) a change in fiscal policy 
C) a change in monetary policy 
D) an advance in technology 
E) a rise in the exchange rate

Question 15

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 16

Economic growth results when there are increases in

Accepted Answer

A) aggregate demand. 
B) the real wage rate. 
C) long-run aggregate supply. 
D) the inflationary gap. 
E) short-run aggregate supply resulting from falling money wage rates and falling factor prices. 
A) aggregate demand. 
B) the real wage rate. 
C) long-run aggregate supply. 
D) the inflationary gap. 
E) short-run aggregate supply resulting from falling money wage rates and falling factor prices.

Question 17

Figure 26.3.5
  
-Refer to Figure 26.3.5. If the aggregate demand curve is AD₂, 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 18

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 19

Which of the following news quotes best describes a Keynesian view of a recession?

Accepted Answer

A) "Rapid computerization is creating obsolete workers and higher unemployment." 
B) "The unexpectedly tight fiscal policy is raising spending and lowering unemployment." 
C) "The anti-inflationary policy of the Bank of Canada is increasing spending." 
D) "The cuts in government spending have helped lower consumer spending and created unemployment." 
E) "Businesses are very worried about future sales and have lowered their purchases of capital equipment." 
A) "Rapid computerization is creating obsolete workers and higher unemployment." 
B) "The unexpectedly tight fiscal policy is raising spending and lowering unemployment." 
C) "The anti-inflationary policy of the Bank of Canada is increasing spending." 
D) "The cuts in government spending have helped lower consumer spending and created unemployment." 
E) "Businesses are very worried about future sales and have lowered their purchases of capital equipment."

Question 20

Consider an economy starting from a position of full employment. Which one of the following changes does not occur as a result of an increase in aggregate demand?

Accepted Answer

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

Everything else remaining the same, an increase in the quantity of money

If the price level rises, then the wealth effect leads to

Figure 26.3.2 -Refer to Figure 26.3.2. Short-run macroeconomic equilibrium real GDP in Mythlo is ________ billion.

Canadian firms build new pipelines across the nation. What is the effect on the quantity of real GDP demanded or aggregate demand in Canada?

Potential GDP is the level of real GDP at which

Table 26.3.3 -Refer to Table 26.3.3. When the economy is at its short-run macroeconomic equilibrium,

Figure 26.3.3 -Refer to Figure 26.3.3(a). You might expect the government to

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

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

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

Canadian businesses expect future profits to rise. Starting from a position of long-run equilibrium, what effect does this event have on Canada's economy in the short run?

The defining feature of the classical view of macroeconomics is that the economy is

An increase in the money wage rate shifts

Which of the following does not change aggregate demand?

Figure 26.3.5 -Refer to Figure 26.3.5. At point B the economy has

Economic growth results when there are increases in

Figure 26.3.5 -Refer to Figure 26.3.5. If the aggregate demand curve is AD₂, real GDP is

Short-run macroeconomic equilibrium always occurs when the

Which of the following news quotes best describes a Keynesian view of a recession?

Consider an economy starting from a position of full employment. Which one of the following changes does not occur as a result of an increase in aggregate demand?

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

Everything else remaining the same, an increase in the quantity of money

If the price level rises, then the wealth effect leads to

Figure 26.3.2 -Refer to Figure 26.3.2. Short-run macroeconomic equilibrium real GDP in Mythlo is ________ billion.

Canadian firms build new pipelines across the nation. What is the effect on the quantity of real GDP demanded or aggregate demand in Canada?

Potential GDP is the level of real GDP at which

Table 26.3.3 -Refer to Table 26.3.3. When the economy is at its short-run macroeconomic equilibrium,

Figure 26.3.3 -Refer to Figure 26.3.3(a). You might expect the government to

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

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

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

Canadian businesses expect future profits to rise. Starting from a position of long-run equilibrium, what effect does this event have on Canada's economy in the short run?

The defining feature of the classical view of macroeconomics is that the economy is

An increase in the money wage rate shifts

Which of the following does not change aggregate demand?

Figure 26.3.5 -Refer to Figure 26.3.5. At point B the economy has

Economic growth results when there are increases in

Figure 26.3.5 -Refer to Figure 26.3.5. If the aggregate demand curve is AD₂, real GDP is

Short-run macroeconomic equilibrium always occurs when the

Which of the following news quotes best describes a Keynesian view of a recession?

Consider an economy starting from a position of full employment. Which one of the following changes does not occur as a result of an increase in aggregate demand?

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