Question 1

The aggregate demand curve is a 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.

Question 2

Use the figure below to answer the following questions.
   
Figure 26.3.1
-Refer to Figure 26.3.1.Econoworld is at its short-run macroeconomic equilibrium.There is a difference between ________ real GDP and potential GDP of $________ billion.

Accepted Answer

A) above full-employment equilibrium; 40 
B) above full-employment equilibrium; 20 
C) below full-employment equilibrium; 40 
D) below full-employment equilibrium; 20 
E) full-employment equilibrium; 0 
A) above full-employment equilibrium; 40 
B) above full-employment equilibrium; 20 
C) below full-employment equilibrium; 40 
D) below full-employment equilibrium; 20 
E) full-employment equilibrium; 0

Question 3

Use the figure below to answer the following questions.
   
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 4

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 5

Use the figure below to answer the following questions.
   
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.

Question 6

If a change in wealth is induced by a change in the price level,then this would be shown as a

Accepted Answer

A) movement along the aggregate demand curve. 
B) shift of the aggregate demand curve due to the substitution effects. 
C) movement along the aggregate demand curve due to the substitution effects. 
D) movement along the aggregate supply curve. 
E) shift of the aggregate demand curve due to the wealth effect. 
A) movement along the aggregate demand curve. 
B) shift of the aggregate demand curve due to the substitution effects. 
C) movement along the aggregate demand curve due to the substitution effects. 
D) movement along the aggregate supply curve. 
E) shift of the aggregate demand curve due to the wealth effect.

Question 7

Use the figure below to answer the following questions.
   
Figure 26.2.1
-Refer to Figure 26.2.1.Which graph illustrates what happens when government expenditure decreases?

Accepted Answer

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

Question 8

The long-run aggregate supply curve is vertical because

Accepted Answer

A) potential GDP is independent of the price level. 
B) actual output can never exceed, even temporarily, the output rate implied by the economy's long-run aggregate supply curve. 
C) a vertical long-run aggregate supply curve indicates the maximum output rate that an economy can ever reach. 
D) a vertical long-run supply curve indicates that an increase in aggregate demand will lead to a larger real GDP, but not a larger nominal GDP. 
E) potential GDP never changes. 
A) potential GDP is independent of the price level. 
B) actual output can never exceed, even temporarily, the output rate implied by the economy's long-run aggregate supply curve. 
C) a vertical long-run aggregate supply curve indicates the maximum output rate that an economy can ever reach. 
D) a vertical long-run supply curve indicates that an increase in aggregate demand will lead to a larger real GDP, but not a larger nominal GDP. 
E) potential GDP never changes.

Question 9

Use the figure below to answer the following questions.
   
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 10

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 11

The short-run aggregate supply curve is the relationship between the quantity of real GDP supplied and

Accepted Answer

A) the quantity of real GDP demanded. 
B) real income. 
C) the inflation rate. 
D) the real interest rate. 
E) the price level. 
A) the quantity of real GDP demanded. 
B) real income. 
C) the inflation rate. 
D) the real interest rate. 
E) the price level.

Question 12

Use the table below to answer the following question.
Table 26.3.2
  
-Refer to Table 26.3.2.The International Monetary Fund's World Economic Outlook database provides the data given in the table for India in 2004,2005 and 2006. The numbers in the table are consistent with

Accepted Answer

A) increases in long-run and short-run aggregate supply and even greater increases in aggregate demand. 
B) increases in short-run aggregate supply and increases in aggregate demand, but the increases in aggregate demand are smaller than the increases in short-run aggregate supply. 
C) increases in long-run and short-run aggregate supply and even larger decreases in aggregate demand. 
D) decreases in long-run and short-run aggregate supply and even greater decreases in aggregate demand. 
E) increases in short-run aggregate supply and no change in aggregate demand. 
A) increases in long-run and short-run aggregate supply and even greater increases in aggregate demand. 
B) increases in short-run aggregate supply and increases in aggregate demand, but the increases in aggregate demand are smaller than the increases in short-run aggregate supply. 
C) increases in long-run and short-run aggregate supply and even larger decreases in aggregate demand. 
D) decreases in long-run and short-run aggregate supply and even greater decreases in aggregate demand. 
E) increases in short-run aggregate supply and no change in aggregate demand.

Question 13

Use the figure below to answer the following questions.
   
Figure 26.3.2
-Refer to Figure 26.3.2.Currently in Mythlo

Accepted Answer

A) there is a below full-employment equilibrium. 
B) the actual unemployment rate is less than the natural unemployment rate. 
C) potential GDP is greater than equilibrium GDP. 
D) the actual unemployment rate is equal to the natural unemployment rate. 
E) there is a recessionary gap. 
A) there is a below full-employment equilibrium. 
B) the actual unemployment rate is less than the natural unemployment rate. 
C) potential GDP is greater than equilibrium GDP. 
D) the actual unemployment rate is equal to the natural unemployment rate. 
E) there is a recessionary gap.

Question 14

Everything else remaining the same,which one of the following increases aggregate demand?

Accepted Answer

A) an increase in taxes 
B) an increase in transfer payments 
C) a decrease in government spending 
D) a decrease in the price level 
E) a decrease in the quantity of money 
A) an increase in taxes 
B) an increase in transfer payments 
C) a decrease in government spending 
D) a decrease in the price level 
E) a decrease in the quantity of money

Question 15

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 16

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 17

The quantity of real GDP demanded is composed of the purchases of

Accepted Answer

A) households and net exporters only. 
B) firms, bondholders, and net exporters only. 
C) firms and governments only. 
D) consumers, firms, governments, and net exporters. 
E) consumers, firms, and governments only. 
A) households and net exporters only. 
B) firms, bondholders, and net exporters only. 
C) firms and governments only. 
D) consumers, firms, governments, and net exporters. 
E) consumers, firms, and governments only.

Question 18

Use the figure below to answer the following questions.
   
Figure 26.2.1
-Refer to Figure 26.2.1.Which graph illustrates what happens when government expenditure increases?

Accepted Answer

A) (a) 
B) (b) 
C) (c) 
D) (d) 
E) None of the above 
A) (a) 
B) (b) 
C) (c) 
D) (d) 
E) None of the above

Question 19

Suppose there is an increase in the quantity of capital.As a result,the SAS

Accepted Answer

A) and the LAS curves both shift leftward. 
B) and the LAS curves both shift rightward. 
C) curve does not shift but the LAS curve shifts rightward. 
D) curve does not shift but the LAS curve shifts leftward. 
E) shifts rightward, but the LAS curve does not shift. 
A) and the LAS curves both shift leftward. 
B) and the LAS curves both shift rightward. 
C) curve does not shift but the LAS curve shifts rightward. 
D) curve does not shift but the LAS curve shifts leftward. 
E) shifts rightward, but the LAS curve does not shift.

Question 20

Which one of the following is a reason for the negative slope of the aggregate demand curve?

Accepted Answer

A) the real wage effect 
B) the substitution effects 
C) the expected inflation effect 
D) the nominal balance effect 
E) the income effect 
A) the real wage effect 
B) the substitution effects 
C) the expected inflation effect 
D) the nominal balance effect 
E) the income effect

The aggregate demand curve is a relationship between

Use the figure below to answer the following questions. Figure 26.3.1 -Refer to Figure 26.3.1.Econoworld is at its short-run macroeconomic equilibrium.There is a difference between real GDP and potential GDP of $ billion.

Use the figure below to answer the following questions. 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

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

If a change in wealth is induced by a change in the price level,then this would be shown as a

Use the figure below to answer the following questions. Figure 26.2.1 -Refer to Figure 26.2.1.Which graph illustrates what happens when government expenditure decreases?

The long-run aggregate supply curve is vertical because

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

The short-run aggregate supply curve is the relationship between the quantity of real GDP supplied and

Use the table below to answer the following question. Table 26.3.2 -Refer to Table 26.3.2.The International Monetary Fund's World Economic Outlook database provides the data given in the table for India in 2004,2005 and 2006. The numbers in the table are consistent with

Use the figure below to answer the following questions. Figure 26.3.2 -Refer to Figure 26.3.2.Currently in Mythlo

Everything else remaining the same,which one of the following increases aggregate demand?

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

The quantity of real GDP demanded is composed of the purchases of

Use the figure below to answer the following questions. Figure 26.2.1 -Refer to Figure 26.2.1.Which graph illustrates what happens when government expenditure increases?

Suppose there is an increase in the quantity of capital.As a result,the SAS

Which one of the following is a reason for the negative slope of the aggregate demand curve?

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 Keynesian Model

Canadian Inflation,unemployment,and Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

Exam 26: Aggregate Supply and Aggregate Demand

The aggregate demand curve is a relationship between

Use the figure below to answer the following questions. Figure 26.3.1 -Refer to Figure 26.3.1.Econoworld is at its short-run macroeconomic equilibrium.There is a difference between ________ real GDP and potential GDP of $________ billion.

Use the figure below to answer the following questions. 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

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

If a change in wealth is induced by a change in the price level,then this would be shown as a

Use the figure below to answer the following questions. Figure 26.2.1 -Refer to Figure 26.2.1.Which graph illustrates what happens when government expenditure decreases?

The long-run aggregate supply curve is vertical because

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

The short-run aggregate supply curve is the relationship between the quantity of real GDP supplied and

Use the table below to answer the following question. Table 26.3.2 -Refer to Table 26.3.2.The International Monetary Fund's World Economic Outlook database provides the data given in the table for India in 2004,2005 and 2006. The numbers in the table are consistent with

Use the figure below to answer the following questions. Figure 26.3.2 -Refer to Figure 26.3.2.Currently in Mythlo

Everything else remaining the same,which one of the following increases aggregate demand?

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

The quantity of real GDP demanded is composed of the purchases of

Use the figure below to answer the following questions. Figure 26.2.1 -Refer to Figure 26.2.1.Which graph illustrates what happens when government expenditure increases?

Suppose there is an increase in the quantity of capital.As a result,the SAS

Which one of the following is a reason for the negative slope of the aggregate demand curve?

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 Keynesian Model

Canadian Inflation,unemployment,and Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

Use the figure below to answer the following questions. Figure 26.3.1 -Refer to Figure 26.3.1.Econoworld is at its short-run macroeconomic equilibrium.There is a difference between real GDP and potential GDP of $ billion.