Question 1

Keynesian macroeconomists recommend

Accepted Answer

A) an increase in the quantity of money to offset decreases in aggregate demand and a decrease in the quantity of money to offset increases in aggregate demand. 
B) policies that actively offset changes in long-run aggregate supply that result in negative economic growth. 
C) policies that minimize the disincentive effects of taxes on employment, investment, and technological change. 
D) policies that actively offset changes in aggregate demand that bring recession. 
E) none of the above. 
A) an increase in the quantity of money to offset decreases in aggregate demand and a decrease in the quantity of money to offset increases in aggregate demand. 
B) policies that actively offset changes in long-run aggregate supply that result in negative economic growth. 
C) policies that minimize the disincentive effects of taxes on employment, investment, and technological change. 
D) policies that actively offset changes in aggregate demand that bring recession. 
E) none of the above.

Question 2

Use the figure below to answer the following questions.
   
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 3

Classical macroeconomists recommend

Accepted Answer

A) policies that actively offset changes in long-run aggregate supply that result in negative economic growth. 
B) an increase in the quantity of money to offset decreases in aggregate demand and a decrease in the quantity of money to offset increases in aggregate demand. 
C) policies that actively offset changes in aggregate demand that bring recession. 
D) policies that minimize the disincentive effects of taxes on employment, investment, and technological change. 
E) all of the above. 
A) policies that actively offset changes in long-run aggregate supply that result in negative economic growth. 
B) an increase in the quantity of money to offset decreases in aggregate demand and a decrease in the quantity of money to offset increases in aggregate demand. 
C) policies that actively offset changes in aggregate demand that bring recession. 
D) policies that minimize the disincentive effects of taxes on employment, investment, and technological change. 
E) all of the above.

Question 4

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 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 5

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 the quantity of money decreases?

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 6

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 7

Use the table below to answer the following questions.
Table 26.3.1
  
-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 8

Use the table below to answer the following questions.
Table 26.3.1
  
-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 9

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 10

If factor prices remain constant ,an increase in aggregate demand

Accepted Answer

A) increases the price level and increases real GDP. 
B) increases the price level and decreases real GDP. 
C) decreases the price level and increases real GDP. 
D) decreases the price level and decreases real GDP. 
E) increases the price level, and leaves real GDP unchanged. 
A) increases the price level and increases real GDP. 
B) increases the price level and decreases real GDP. 
C) decreases the price level and increases real GDP. 
D) decreases the price level and decreases real GDP. 
E) increases the price level, and leaves real GDP unchanged.

Question 11

Use the figure below to answer the following questions.
   
Figure 26.3.1
-Refer to Figure 26.3.1.Short-run macroeconomic equilibrium real GDP in Econoworld is

Accepted Answer

A) $360 billion. 
B) $400 billion. 
C) $440 billion. 
D) $480 billion. 
E) $520 billion. 
A) $360 billion. 
B) $400 billion. 
C) $440 billion. 
D) $480 billion. 
E) $520 billion.

Question 12

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 13

Use the figure below to answer the following question.
   
Figure 26.3.4
-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) None of the above. 
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) None of the above.

Question 14

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 15

A ________ macroeconomist believes that business cycle fluctuations are the efficient responses of a well-functioning market economy that is bombarded by shocks that arise from the uneven pace of technological change. A ________ macroeconomist believes that the short-run aggregate supply curve is horizontal at a fixed price level.

Accepted Answer

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

Question 16

Use the figure below to answer the following questions.
   
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 17

Use the table below to answer the following questions.
Table 26.3.1
  
-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 18

Use the figure below to answer the following questions.
   
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)

Question 19

Which of the following situations illustrates how monetary 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, the aggregate demand curve shifts leftward. 
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) Both A and D are examples of monetary policy. 
A) The Bank of Canada raises interest rates so people plan to buy less consumer durables. As a result, the aggregate demand curve shifts leftward. 
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) Both A and D are examples of monetary policy.

Question 20

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."

Keynesian macroeconomists recommend

Use the figure below to answer the following questions. 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.

Classical macroeconomists recommend

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 the quantity of money decreases?

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

Use the table below to answer the following questions. Table 26.3.1 -Refer to Table 26.3.1.Consider the economy represented in the table.The economy is in

Use the table below to answer the following questions. Table 26.3.1 -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.

Everything else remaining the same,an increase in foreign income

If factor prices remain constant ,an increase in aggregate demand

Use the figure below to answer the following questions. Figure 26.3.1 -Refer to Figure 26.3.1.Short-run macroeconomic equilibrium real GDP in Econoworld is

Economic growth results when there are increases in

Use the figure below to answer the following question. Figure 26.3.4 -Which of the following will lower the price level for sure?

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

Use the figure below to answer the following questions. Figure 26.3.3 -Refer to Figure 26.3.3(b).You might expect the government to

Use the table below to answer the following questions. Table 26.3.1 -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.

Use the figure below to answer the following questions. 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?

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

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

Keynesian macroeconomists recommend

Use the figure below to answer the following questions. 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.

Classical macroeconomists recommend

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 the quantity of money decreases?

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

Use the table below to answer the following questions. Table 26.3.1 -Refer to Table 26.3.1.Consider the economy represented in the table.The economy is in

Use the table below to answer the following questions. Table 26.3.1 -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.

Everything else remaining the same,an increase in foreign income

If factor prices remain constant ,an increase in aggregate demand

Use the figure below to answer the following questions. Figure 26.3.1 -Refer to Figure 26.3.1.Short-run macroeconomic equilibrium real GDP in Econoworld is

Economic growth results when there are increases in

Use the figure below to answer the following question. Figure 26.3.4 -Which of the following will lower the price level for sure?

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

Use the figure below to answer the following questions. Figure 26.3.3 -Refer to Figure 26.3.3(b).You might expect the government to

Use the table below to answer the following questions. Table 26.3.1 -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.

Use the figure below to answer the following questions. 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?

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

Which one of the following newspaper quotations describes a leftward shift of the LAS 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 26.3.2 -Refer to Figure 26.3.2.In Mythlo there is a difference between the equilibrium real GDP and potential GDP of billion.

Use the table below to answer the following questions. Table 26.3.1 -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.

Use the table below to answer the following questions. Table 26.3.1 -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.