Question 1

Aggregate demand

Accepted Answer

A) measures the amount of a nation's goods and services that people are willing to buy. 
B) measures the amount of a nation's labour, capital, and technology that people are willing to buy. 
C) is the relationship between the quantity of real GDP demanded and the price level. 
D) increases when the price level falls. 
E) increases when factor prices fall. 
A) measures the amount of a nation's goods and services that people are willing to buy. 
B) measures the amount of a nation's labour, capital, and technology that people are willing to buy. 
C) is the relationship between the quantity of real GDP demanded and the price level. 
D) increases when the price level falls. 
E) increases when factor prices fall.

Question 2

Figure 26.3.5
  
-Refer to Figure 26.3.5. The shift of the aggregate demand curve from AD₀ to AD₁ might have been the result of

Accepted Answer

A) an increase in government expenditure. 
B) a decrease in taxes. 
C) an increase in the quantity of money. 
D) a fall in the foreign exchange rate 
E) all of the above. 
A) an increase in government expenditure. 
B) a decrease in taxes. 
C) an increase in the quantity of money. 
D) a fall in the foreign exchange rate 
E) all of the above.

Question 3

Which of the following situations illustrates how fiscal policy can influence aggregate demand?

Accepted Answer

A) The Bank of Canada raises interest rates so people plan to buy less consumer durables. As a result, aggregate demand decreases. 
B) Investors, anticipating an erosion of financial wealth due to inflation, decide to save more. As a result, aggregate demand decreases. 
C) The government reduces the goods and services tax. As a result, consumption expenditure increases and aggregate demand increases. 
D) The exchange rate value of the Canadian dollar rises. As a result, people living near the U.S.-Canada border increase their imports of goods and net exports decrease. 
E) The government increases its expenditures. The demand for loanable funds increases, which raises the real interest rate. Investment increases. 
A) The Bank of Canada raises interest rates so people plan to buy less consumer durables. As a result, aggregate demand decreases. 
B) Investors, anticipating an erosion of financial wealth due to inflation, decide to save more. As a result, aggregate demand decreases. 
C) The government reduces the goods and services tax. As a result, consumption expenditure increases and aggregate demand increases. 
D) The exchange rate value of the Canadian dollar rises. As a result, people living near the U.S.-Canada border increase their imports of goods and net exports decrease. 
E) The government increases its expenditures. The demand for loanable funds increases, which raises the real interest rate. Investment increases.

Question 4

If real GDP is less than potential GDP, then the economy is

Accepted Answer

A) not in short-run equilibrium. 
B) in a full-employment equilibrium. 
C) in an above full-employment equilibrium. 
D) in a below full-employment equilibrium. 
E) in long-run equilibrium. 
A) not in short-run equilibrium. 
B) in a full-employment equilibrium. 
C) in an above full-employment equilibrium. 
D) in a below full-employment equilibrium. 
E) in long-run equilibrium.

Question 5

Everything else remaining the same, an increase in foreign income

Accepted Answer

A) increases Canada's aggregate supply. 
B) increases Canada's aggregate demand. 
C) decreases Canada's aggregate demand. 
D) creates a movement downward along Canada's aggregate demand curve. 
E) decreases Canada's aggregate supply. 
A) increases Canada's aggregate supply. 
B) increases Canada's aggregate demand. 
C) decreases Canada's aggregate demand. 
D) creates a movement downward along Canada's aggregate demand curve. 
E) decreases Canada's aggregate supply.

Question 6

Table 26.3.3
  
-Refer to Table 26.3.3. With no interference from the central bank or the government, the

Accepted Answer

A) money wage rate will eventually rise. 
B) money wage rate will eventually fall. 
C) short-run aggregate supply curve will shift leftward. 
D) long-run aggregate supply curve will shift leftward. 
E) aggregate demand curve will shift rightward. 
A) money wage rate will eventually rise. 
B) money wage rate will eventually fall. 
C) short-run aggregate supply curve will shift leftward. 
D) long-run aggregate supply curve will shift leftward. 
E) aggregate demand curve will shift rightward.

Question 7

The short-run aggregate supply curve indicates

Accepted Answer

A) the relationship between the price level and real GDP demanded by consumers, investors, governments, and net exporters. 
B) the relationship between the price level and the natural unemployment rate. 
C) the relationship between the purchasing power of wages and the quantity of labour supplied by households. 
D) the relationship between the quantity of real GDP supplied and the price level when the money wage rate, the prices of other resources, and potential GDP remain constant. 
E) the various quantities of real GDP producers supply at different income levels. 
A) the relationship between the price level and real GDP demanded by consumers, investors, governments, and net exporters. 
B) the relationship between the price level and the natural unemployment rate. 
C) the relationship between the purchasing power of wages and the quantity of labour supplied by households. 
D) the relationship between the quantity of real GDP supplied and the price level when the money wage rate, the prices of other resources, and potential GDP remain constant. 
E) the various quantities of real GDP producers supply at different income levels.

Question 8

Which one of the following newspaper quotations describes a shift of only the SAS 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 work 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 work force." 
E) "The recent tornadoes destroyed many factories in Calgary and Edmonton."

Question 9

Which of the following news quotes best describes a new classical 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 10

Your total wealth is $1,000, which you are holding in your savings account. If the price level rises by 10 percent, your wealth

Accepted Answer

A) increases by an unknown amount. 
B) is unchanged. 
C) decreases to $990. 
D) is worth 10 percent less than before the price level change. 
E) increases to $1,100. 
A) increases by an unknown amount. 
B) is unchanged. 
C) decreases to $990. 
D) is worth 10 percent less than before the price level change. 
E) increases to $1,100.

Question 11

Which of the following will lower the price level for sure?

Accepted Answer

A) The AD curve shifts rightward and the SAS curve shifts leftward. 
B) The AD curve shifts rightward and the SAS curve remains unchanged. 
C) The SAS curve shifts leftward. 
D) The LAS curve shifts leftward. 
E) The AD curve shifts leftward and the SAS curve shifts rightward. 
A) The AD curve shifts rightward and the SAS curve shifts leftward. 
B) The AD curve shifts rightward and the SAS curve remains unchanged. 
C) The SAS curve shifts leftward. 
D) The LAS curve shifts leftward. 
E) The AD curve shifts leftward and the SAS curve shifts rightward.

Question 12

Which one of the following newspaper quotations describes a rightward shift of the 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 work 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 work force." 
E) "The recent tornadoes destroyed many factories in Calgary and Edmonton."

Question 13

Figure 26.3.3
  
-Refer to Figure 26.3.3(b). 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 14

Which one of the following newspaper quotations describes a leftward shift of the 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 work 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 work force." 
E) "The recent tornadoes destroyed many factories in Calgary and Edmonton."

Question 15

Which one of the following newspaper quotations describes a movement along an SAS 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

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 eventually moves to its long-run equilibrium. In long-run equilibrium, the price level is ________ and real GDP is ________ billion.

Accepted Answer

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

Question 17

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

Accepted Answer

A) a decrease in the quantity of money 
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 expected future profits 
A) a decrease in the quantity of money 
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 expected future profits

Question 18

Which one of the following factors will not shift the aggregate demand curve?

Accepted Answer

A) an increase in the interest rate 
B) an increase in the expected inflation rate 
C) an increase in the price level 
D) an increase in expected future profits 
E) an increase in the quantity of money 
A) an increase in the interest rate 
B) an increase in the expected inflation rate 
C) an increase in the price level 
D) an increase in expected future profits 
E) an increase in the quantity of money

Question 19

Long-run aggregate supply will increase for all of the following reasons except

Accepted Answer

A) a fall in the money wage rate. 
B) an increase in human capital. 
C) the introduction of new technology. 
D) an increase in the full-employment quantity of labour. 
E) an increase in the quantity of capital. 
A) a fall in the money wage rate. 
B) an increase in human capital. 
C) the introduction of new technology. 
D) an increase in the full-employment quantity of labour. 
E) an increase in the quantity of capital.

Question 20

Figure 26.3.3
  
-Refer to Figure 26.3.3. In which of the graphs would we predict that eventually the price level will fall and real GDP will increase, all else remaining the same?

Accepted Answer

A) (a)only 
B) (b)only 
C) (c)only 
D) (d)only 
E) (c)and (d) 
A) (a)only 
B) (b)only 
C) (c)only 
D) (d)only 
E) (c)and (d)

Aggregate demand

Figure 26.3.5 -Refer to Figure 26.3.5. The shift of the aggregate demand curve from AD₀ to AD₁ might have been the result of

Which of the following situations illustrates how fiscal policy can influence aggregate demand?

If real GDP is less than potential GDP, then the economy is

Everything else remaining the same, an increase in foreign income

Table 26.3.3 -Refer to Table 26.3.3. With no interference from the central bank or the government, the

The short-run aggregate supply curve indicates

Which one of the following newspaper quotations describes a shift of only the SAS curve?

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

Your total wealth is $1,000, which you are holding in your savings account. If the price level rises by 10 percent, your wealth

Which of the following will lower the price level for sure?

Which one of the following newspaper quotations describes a rightward shift of the LAS curve?

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

Which one of the following newspaper quotations describes a leftward shift of the LAS curve?

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

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

Which one of the following factors will not shift the aggregate demand curve?

Long-run aggregate supply will increase for all of the following reasons except

Figure 26.3.3 -Refer to Figure 26.3.3. In which of the graphs would we predict that eventually the price level will fall and real GDP will increase, all else remaining the same?

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

Aggregate demand

Figure 26.3.5 -Refer to Figure 26.3.5. The shift of the aggregate demand curve from AD₀ to AD₁ might have been the result of

Which of the following situations illustrates how fiscal policy can influence aggregate demand?

If real GDP is less than potential GDP, then the economy is

Everything else remaining the same, an increase in foreign income

Table 26.3.3 -Refer to Table 26.3.3. With no interference from the central bank or the government, the

The short-run aggregate supply curve indicates

Which one of the following newspaper quotations describes a shift of only the SAS curve?

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

Your total wealth is $1,000, which you are holding in your savings account. If the price level rises by 10 percent, your wealth

Which of the following will lower the price level for sure?

Which one of the following newspaper quotations describes a rightward shift of the LAS curve?

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

Which one of the following newspaper quotations describes a leftward shift of the LAS curve?

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

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

Which one of the following factors will not shift the aggregate demand curve?

Long-run aggregate supply will increase for all of the following reasons except

Figure 26.3.3 -Refer to Figure 26.3.3. In which of the graphs would we predict that eventually the price level will fall and real GDP will increase, all else remaining the same?

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