Question 1

Figure 26.2.1
  
-Refer to Figure 26.2.1. Which graph illustrates what happens when the quantity of money increases?

Accepted Answer

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

Question 2

A technological advance shifts

Accepted Answer

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

Question 3

We observe an increase 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 4

Beginning at a long-run equilibrium, an increase in aggregate demand

Accepted Answer

A) increases the price level and in the long run increases real GDP. 
B) increases the price level and in the long run decreases real GDP. 
C) decreases the price level and in the long run increases real GDP. 
D) decreases the price level and in the long run decreases real GDP. 
E) increases the price level, but in the long run there is no change in real GDP. 
A) increases the price level and in the long run increases real GDP. 
B) increases the price level and in the long run decreases real GDP. 
C) decreases the price level and in the long run increases real GDP. 
D) decreases the price level and in the long run decreases real GDP. 
E) increases the price level, but in the long run there is no change in real GDP.

Question 5

Toyota and Honda build additional plants in Canada. This event ________ short-run aggregate supply and ________ long-run aggregate supply.

Accepted Answer

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

Question 6

The world goes into an expansion. This event

Accepted Answer

A) decreases Canada's aggregate demand and decreases Canada's short-run aggregate supply. 
B) increases Canada's short-run aggregate supply. 
C) decreases Canada's aggregate demand. 
D) increases Canada's aggregate demand. 
E) increases Canada's long-run aggregate supply. 
A) decreases Canada's aggregate demand and decreases Canada's short-run aggregate supply. 
B) increases Canada's short-run aggregate supply. 
C) decreases Canada's aggregate demand. 
D) increases Canada's aggregate demand. 
E) increases Canada's long-run aggregate supply.

Question 7

Figure 26.3.1
  
-Refer to Figure 26.3.1. Consider statements (1)and (2)and select the correct answer. (1) The actual unemployment rate exceeds the natural unemployment rate.
(2) Short-run aggregate supply will automatically shift leftward as the economy adjusts to long-run equilibrium.

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 money wage rate falls. 
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 money wage rate falls.

Question 8

Which one of the following shifts the aggregate demand curve leftward?

Accepted Answer

A) a decrease in the interest rate 
B) an increase in expected inflation 
C) an increase in taxes 
D) an increase in the price level 
E) an increase in the money wage rate 
A) a decrease in the interest rate 
B) an increase in expected inflation 
C) an increase in taxes 
D) an increase in the price level 
E) an increase in the money wage rate

Question 9

Figure 26.3.3
  
-Refer to Figure 26.3.3. Which one of the graphs illustrates a full-employment equilibrium?

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)

Question 10

Figure 26.3.4
  
-Refer to Figure 26.3.4. The changes represented

Accepted Answer

A) cannot occur because aggregate demand and short-run aggregate supply cannot change at the same time. 
B) lead to an inflationary gap. 
C) lead to a recessionary gap. 
D) cause a proportionate increase in long run aggregate supply. 
E) increase real GDP. 
A) cannot occur because aggregate demand and short-run aggregate supply cannot change at the same time. 
B) lead to an inflationary gap. 
C) lead to a recessionary gap. 
D) cause a proportionate increase in long run aggregate supply. 
E) increase real GDP.

Question 11

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 an above full-employment equilibrium.
(2) SAS will automatically shift rightward as the economy adjusts to long-run equilibrium.

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 unemployment is below the natural rate. 
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 unemployment is below the natural rate.

Question 12

A ________ macroeconomist believes that the economy is self-regulating and always at full employment. A ________ macroeconomist believes the economy requires active help from fiscal policy and monetary policy to maintain full employment.

Accepted Answer

A) Keynesian; new Keynesian 
B) classical; monetarist 
C) classical; Keynesian 
D) new classical; monetarist 
E) monetarist; classical 
A) Keynesian; new Keynesian 
B) classical; monetarist 
C) classical; Keynesian 
D) new classical; monetarist 
E) monetarist; classical

Question 13

The long-run aggregate supply curve is

Accepted Answer

A) vertical. 
B) negatively sloped. 
C) positively sloped but extremely steep. 
D) almost flat. 
E) positively sloped at low levels of real GDP and vertical at high levels of real GDP. 
A) vertical. 
B) negatively sloped. 
C) positively sloped but extremely steep. 
D) almost flat. 
E) positively sloped at low levels of real GDP and vertical at high levels of real GDP.

Question 14

A vertical long-run aggregate supply curve indicates that

Accepted Answer

A) an increase in the price level will not expand an economy's output in the long run. 
B) output rates greater than the long-run output rate are unattainable. 
C) an increase in the price level will permit the economy to achieve a higher level of output. 
D) an increase in the price level will increase technological change and economic growth. 
E) the long-run aggregate supply curve never shifts. 
A) an increase in the price level will not expand an economy's output in the long run. 
B) output rates greater than the long-run output rate are unattainable. 
C) an increase in the price level will permit the economy to achieve a higher level of output. 
D) an increase in the price level will increase technological change and economic growth. 
E) the long-run aggregate supply curve never shifts.

Question 15

The quantity of real GDP demanded is the sum of real consumption expenditure (C), investment (I),

Accepted Answer

A) government expenditure (G), exports (X), and imports (M). 
B) government expenditure (G), and exports (X)minus imports (M). 
C) exports (X), and imports (M). 
D) and exports (X)minus imports (M). 
E) and government expenditure (G). 
A) government expenditure (G), exports (X), and imports (M). 
B) government expenditure (G), and exports (X)minus imports (M). 
C) exports (X), and imports (M). 
D) and exports (X)minus imports (M). 
E) and government expenditure (G).

Question 16

If the money wage rate falls, then

Accepted Answer

A) the AD curve shifts rightward. 
B) firms hire less labour. 
C) the LAS curve shifts rightward. 
D) the SAS curve shifts rightward. 
E) the LAS curve and the SAS curve shift rightward. 
A) the AD curve shifts rightward. 
B) firms hire less labour. 
C) the LAS curve shifts rightward. 
D) the SAS curve shifts rightward. 
E) the LAS curve and the SAS curve shift rightward.

Question 17

Figure 26.3.1
  
-Refer to Figure 26.3.1. When the economy of Econoworld is in short-run macroeconomic equilibrium, the price level is

Accepted Answer

A) 100. 
B) 90. 
C) 75. 
D) 70. 
E) 85. 
A) 100. 
B) 90. 
C) 75. 
D) 70. 
E) 85.

Question 18

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

Accepted Answer

A) SAS curve shifts rightward. 
B) AD curve shifts rightward. 
C) SAS curve shifts leftward. 
D) AD curve shifts leftward. 
E) LAS curve shifts rightward. 
A) SAS curve shifts rightward. 
B) AD curve shifts rightward. 
C) SAS curve shifts leftward. 
D) AD curve shifts leftward. 
E) LAS curve shifts rightward.

Question 19

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

Accepted Answer

A) 90. 
B) 110. 
C) 100. 
D) 120. 
E) 130. 
A) 90. 
B) 110. 
C) 100. 
D) 120. 
E) 130.

Question 20

Figure 26.3.5
  
-Refer to Figure 26.3.5. When the economy is at full employment, 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.

Figure 26.2.1 -Refer to Figure 26.2.1. Which graph illustrates what happens when the quantity of money increases?

A technological advance shifts

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

Beginning at a long-run equilibrium, an increase in aggregate demand

Toyota and Honda build additional plants in Canada. This event short-run aggregate supply and long-run aggregate supply.

The world goes into an expansion. This event

Figure 26.3.1 -Refer to Figure 26.3.1. Consider statements (1)and (2)and select the correct answer. (1) The actual unemployment rate exceeds the natural unemployment rate. (2) Short-run aggregate supply will automatically shift leftward as the economy adjusts to long-run equilibrium.

Which one of the following shifts the aggregate demand curve leftward?

Figure 26.3.3 -Refer to Figure 26.3.3. Which one of the graphs illustrates a full-employment equilibrium?

Figure 26.3.4 -Refer to Figure 26.3.4. The changes represented

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 an above full-employment equilibrium. (2) SAS will automatically shift rightward as the economy adjusts to long-run equilibrium.

A macroeconomist believes that the economy is self-regulating and always at full employment. A macroeconomist believes the economy requires active help from fiscal policy and monetary policy to maintain full employment.

The long-run aggregate supply curve is

A vertical long-run aggregate supply curve indicates that

The quantity of real GDP demanded is the sum of real consumption expenditure (C), investment (I),

If the money wage rate falls, then

Figure 26.3.1 -Refer to Figure 26.3.1. When the economy of Econoworld is in short-run macroeconomic equilibrium, the price level is

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

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

Figure 26.3.5 -Refer to Figure 26.3.5. When the economy is at full employment, real GDP is

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

Figure 26.2.1 -Refer to Figure 26.2.1. Which graph illustrates what happens when the quantity of money increases?

A technological advance shifts

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

Beginning at a long-run equilibrium, an increase in aggregate demand

Toyota and Honda build additional plants in Canada. This event ________ short-run aggregate supply and ________ long-run aggregate supply.

The world goes into an expansion. This event

Figure 26.3.1 -Refer to Figure 26.3.1. Consider statements (1)and (2)and select the correct answer. (1) The actual unemployment rate exceeds the natural unemployment rate. (2) Short-run aggregate supply will automatically shift leftward as the economy adjusts to long-run equilibrium.

Which one of the following shifts the aggregate demand curve leftward?

Figure 26.3.3 -Refer to Figure 26.3.3. Which one of the graphs illustrates a full-employment equilibrium?

Figure 26.3.4 -Refer to Figure 26.3.4. The changes represented

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 an above full-employment equilibrium. (2) SAS will automatically shift rightward as the economy adjusts to long-run equilibrium.

A ________ macroeconomist believes that the economy is self-regulating and always at full employment. A ________ macroeconomist believes the economy requires active help from fiscal policy and monetary policy to maintain full employment.

The long-run aggregate supply curve is

A vertical long-run aggregate supply curve indicates that

The quantity of real GDP demanded is the sum of real consumption expenditure (C), investment (I),

If the money wage rate falls, then

Figure 26.3.1 -Refer to Figure 26.3.1. When the economy of Econoworld is in short-run macroeconomic equilibrium, the price level is

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

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

Figure 26.3.5 -Refer to Figure 26.3.5. When the economy is at full employment, real GDP is

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

Toyota and Honda build additional plants in Canada. This event short-run aggregate supply and long-run aggregate supply.

A macroeconomist believes that the economy is self-regulating and always at full employment. A macroeconomist believes the economy requires active help from fiscal policy and monetary policy to maintain full employment.