Question 1

An increase in ________ increases potential GDP and ________ aggregate supply.

Accepted Answer

A) the money wage rate;decreases 
B) technology;decreases 
C) the money price of oil;decreases 
D) technology;increases 
E) the money wage rate;increases 
A) the money wage rate;decreases 
B) technology;decreases 
C) the money price of oil;decreases 
D) technology;increases 
E) the money wage rate;increases

Question 2

Changes in which of the following do NOT shift the AS curve?
i.The price level
ii.Potential GDP
iii.The money wage rate

Accepted Answer

A) i only 
B) ii only 
C) iii only 
D) i and ii 
E) i,ii and iii 
A) i only 
B) ii only 
C) iii only 
D) i and ii 
E) i,ii and iii

Question 3

The change in potential real GDP and aggregate supply shown in the graph above can be a result of

Accepted Answer

A) a decrease in the money price of oil. 
B) an increase in the real wage rate. 
C) a fall in the price level. 
D) a decrease in the money wage rate. 
E) an increase in the quantity of capital. 
A) a decrease in the money price of oil. 
B) an increase in the real wage rate. 
C) a fall in the price level. 
D) a decrease in the money wage rate. 
E) an increase in the quantity of capital.

Question 4

The aggregate supply curve is a(n)________ curve because it represents the relationship between price level and the quantity of real GDP supplied,two items that are ________ correlated.

Accepted Answer

A) downward-sloping;negatively 
B) vertical;not 
C) upward-sloping;negatively 
D) downward-sloping;positively 
E) upward-sloping;positively 
A) downward-sloping;negatively 
B) vertical;not 
C) upward-sloping;negatively 
D) downward-sloping;positively 
E) upward-sloping;positively

Question 5

Which of the following best describes the effect on the aggregate supply curve if political negotiations result in a substantial decrease in the price of oil?

Accepted Answer

A) The AS curve does not shift but there is an upward movement along it. 
B) The AS curve does not shift but there is a downward movement along it. 
C) The AS curve shifts rightward. 
D) The AS curve shifts leftward. 
E) There is no change to the AS curve. 
A) The AS curve does not shift but there is an upward movement along it. 
B) The AS curve does not shift but there is a downward movement along it. 
C) The AS curve shifts rightward. 
D) The AS curve shifts leftward. 
E) There is no change to the AS curve.

Question 6

If firms' expectations about the future become pessimistic so that they think future profits will be lower,then

Accepted Answer

A) the quantity of real GDP demanded decreases,and there is a movement up along the AD curve. 
B) aggregate demand decreases and the AD curve shifts leftward. 
C) aggregate demand increases and the AD curve shifts rightward. 
D) the aggregate demand curve does not shift,but potential GDP decreases. 
E) the quantity of real GDP demanded increases,and there is a movement down along the AD curve. 
A) the quantity of real GDP demanded decreases,and there is a movement up along the AD curve. 
B) aggregate demand decreases and the AD curve shifts leftward. 
C) aggregate demand increases and the AD curve shifts rightward. 
D) the aggregate demand curve does not shift,but potential GDP decreases. 
E) the quantity of real GDP demanded increases,and there is a movement down along the AD curve.

Question 7

During 2014,a country reports that its price level fell and the money wage rate did not change.These changes led to

Accepted Answer

A) no change in the real wage rate and an increase in aggregate demand. 
B) a lower real wage rate,lower profits,and a decrease in the quantity of real GDP supplied. 
C) a higher real wage rate,higher profits,and an increase in the quantity of real GDP supplied. 
D) a higher real wage rate,lower profits,and a decrease in the quantity of real GDP supplied. 
E) a lower real wage rate,higher profits,and an increase in the quantity of real GDP supplied. 
A) no change in the real wage rate and an increase in aggregate demand. 
B) a lower real wage rate,lower profits,and a decrease in the quantity of real GDP supplied. 
C) a higher real wage rate,higher profits,and an increase in the quantity of real GDP supplied. 
D) a higher real wage rate,lower profits,and a decrease in the quantity of real GDP supplied. 
E) a lower real wage rate,higher profits,and an increase in the quantity of real GDP supplied.

Question 8

A rise in the price level ________ the buying power of money and ________ the quantity of real GDP demanded.

Accepted Answer

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

Question 9

The Reserve Bank responds to an increase in unemployment caused by a decrease in the AS curve by lowering interest rates.This will i.shift the aggregate demand curve rightward and raise the price level.
Ii)shift the aggregate demand curve rightward and the aggregate supply curve leftward,raising prices.
Iii)result in lower employment and a higher price level.

Accepted Answer

A) i and ii 
B) ii and iii 
C) iii only 
D) i only 
E) i and iii 
A) i and ii 
B) ii and iii 
C) iii only 
D) i only 
E) i and iii

Question 10

Cost-push inflation can be started by

Accepted Answer

A) a decrease in the money wage rate. 
B) an increase in the quantity of money. 
C) a decrease in government expenditure on goods and services. 
D) an increase in the money prices of raw materials. 
E) an increase in government expenditure on goods and services. 
A) a decrease in the money wage rate. 
B) an increase in the quantity of money. 
C) a decrease in government expenditure on goods and services. 
D) an increase in the money prices of raw materials. 
E) an increase in government expenditure on goods and services.

Question 11

Because there is a ________ relationship between the price level and the quantity of real GDP supplied,the aggregate supply curve is ________ curve.

Accepted Answer

A) positive;a downward-sloping 
B) positive;a vertical 
C) negative;a downward-sloping 
D) negative;an upward-sloping 
E) positive;an upward-sloping 
A) positive;a downward-sloping 
B) positive;a vertical 
C) negative;a downward-sloping 
D) negative;an upward-sloping 
E) positive;an upward-sloping

Question 12

The table gives the aggregate demand and aggregate supply schedules for a nation.
-Based on the table above,the equilibrium price level is

Accepted Answer

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

Question 13

-In the figure above,the shift in the aggregate demand curve from AD₁ to AD₃ could be the result of an increase in

Accepted Answer

A) the price level. 
B) foreign incomes. 
C) the foreign exchange rate. 
D) expected future income. 
E) aggregate supply. 
A) the price level. 
B) foreign incomes. 
C) the foreign exchange rate. 
D) expected future income. 
E) aggregate supply.

Question 14

By itself,an increase in the price of oil shifts the

Accepted Answer

A) aggregate demand curve leftward and does not shift the aggregate supply curve. 
B) aggregate demand curve rightward and does not shift the aggregate supply curve. 
C) aggregate supply curve rightward and does not shift the aggregate demand curve. 
D) aggregate supply curve leftward and does not shift the aggregate demand curve. 
E) aggregate demand curve rightward and shifts the potential GDP line rightward. 
A) aggregate demand curve leftward and does not shift the aggregate supply curve. 
B) aggregate demand curve rightward and does not shift the aggregate supply curve. 
C) aggregate supply curve rightward and does not shift the aggregate demand curve. 
D) aggregate supply curve leftward and does not shift the aggregate demand curve. 
E) aggregate demand curve rightward and shifts the potential GDP line rightward.

Question 15

The quantity of real GDP supplied increases when the price level increases because

Accepted Answer

A) the quantity of money increases. 
B) investment increases. 
C) aggregate demand increases. 
D) the real wage rate falls. 
E) the real wage rate rises. 
A) the quantity of money increases. 
B) investment increases. 
C) aggregate demand increases. 
D) the real wage rate falls. 
E) the real wage rate rises.

Question 16

A demand-pull inflation initially is characterised by

Accepted Answer

A) decreasing real output and a labour surplus. 
B) increasing real output and a labour shortage. 
C) decreasing real output and a labour shortage. 
D) no change in real output and a labour shortage. 
E) increasing real output and a labour surplus. 
A) decreasing real output and a labour surplus. 
B) increasing real output and a labour shortage. 
C) decreasing real output and a labour shortage. 
D) no change in real output and a labour shortage. 
E) increasing real output and a labour surplus.

Question 17

Aggregate demand ________ if the expected inflation rate increases because ________.

Accepted Answer

A) does not change;inflation does not affect the aggregate demand curve 
B) decreases;people wait for the exchange rates to change before making purchases 
C) increases;people want to make purchases now before the price of goods and services begin to increase 
D) increases;people expect to experience increases in the cost of living as the inflation begins 
E) decreases;people want to wait for the price of goods and services begin to decrease 
A) does not change;inflation does not affect the aggregate demand curve 
B) decreases;people wait for the exchange rates to change before making purchases 
C) increases;people want to make purchases now before the price of goods and services begin to increase 
D) increases;people expect to experience increases in the cost of living as the inflation begins 
E) decreases;people want to wait for the price of goods and services begin to decrease

Question 18

Potential GDP

Accepted Answer

A) might either increase or decrease as the price level increases,depending on whether aggregate demand increases or decreases. 
B) never changes. 
C) is independent of the price level. 
D) increases as the price level increases because firms supply more goods and services. 
E) decreases as the price level increases because people demand fewer goods and services. 
A) might either increase or decrease as the price level increases,depending on whether aggregate demand increases or decreases. 
B) never changes. 
C) is independent of the price level. 
D) increases as the price level increases because firms supply more goods and services. 
E) decreases as the price level increases because people demand fewer goods and services.

Question 19

During an inflationary gap,

Accepted Answer

A) real GDP is less than potential GDP. 
B) the aggregate demand curve and the aggregate supply curve intersect at potential GDP. 
C) the aggregate demand curve and the aggregate supply curve do not intersect. 
D) the aggregate demand curve and the aggregate supply curve intersect at a level of real GDP that exceeds potential GDP. 
E) the price level will fall to restore the long-run equilibrium. 
A) real GDP is less than potential GDP. 
B) the aggregate demand curve and the aggregate supply curve intersect at potential GDP. 
C) the aggregate demand curve and the aggregate supply curve do not intersect. 
D) the aggregate demand curve and the aggregate supply curve intersect at a level of real GDP that exceeds potential GDP. 
E) the price level will fall to restore the long-run equilibrium.

Question 20

If the quantity of real GDP demanded is less than the quantity of real GDP supplied,then

Accepted Answer

A) the economy must be producing at potential GDP. 
B) the price level falls and firms decrease production. 
C) the price level falls and firms increase production. 
D) aggregate demand changes to restore the equilibrium. 
E) the price level rises to restore the macroeconomic equilibrium. 
A) the economy must be producing at potential GDP. 
B) the price level falls and firms decrease production. 
C) the price level falls and firms increase production. 
D) aggregate demand changes to restore the equilibrium. 
E) the price level rises to restore the macroeconomic equilibrium.

An increase in increases potential GDP and aggregate supply.

Changes in which of the following do NOT shift the AS curve? i.The price level ii.Potential GDP iii.The money wage rate

The change in potential real GDP and aggregate supply shown in the graph above can be a result of

The aggregate supply curve is a(n) curve because it represents the relationship between price level and the quantity of real GDP supplied,two items that are correlated.

Which of the following best describes the effect on the aggregate supply curve if political negotiations result in a substantial decrease in the price of oil?

If firms' expectations about the future become pessimistic so that they think future profits will be lower,then

During 2014,a country reports that its price level fell and the money wage rate did not change.These changes led to

A rise in the price level the buying power of money and the quantity of real GDP demanded.

Cost-push inflation can be started by

Because there is a relationship between the price level and the quantity of real GDP supplied,the aggregate supply curve is curve.

The table gives the aggregate demand and aggregate supply schedules for a nation. -Based on the table above,the equilibrium price level is

-In the figure above,the shift in the aggregate demand curve from AD₁ to AD₃ could be the result of an increase in

By itself,an increase in the price of oil shifts the

The quantity of real GDP supplied increases when the price level increases because

A demand-pull inflation initially is characterised by

Aggregate demand if the expected inflation rate increases because .

Potential GDP

During an inflationary gap,

If the quantity of real GDP demanded is less than the quantity of real GDP supplied,then

Getting Started

The Australian and Global Economies

The Economic Problem

Demand and Supply

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Economic Growth

Finance,saving and Investment

Money,the Price Level and Inflation

Aggregate Expenditure Multiplier

The Short-Run Policy Trade Off

Fiscal Policy

Monetary Policy

International Trade Policy

International Finance

Filters

Exam 11: Aggregate Supply and Aggregate Demand

An increase in ________ increases potential GDP and ________ aggregate supply.

Changes in which of the following do NOT shift the AS curve? i.The price level ii.Potential GDP iii.The money wage rate

The change in potential real GDP and aggregate supply shown in the graph above can be a result of

The aggregate supply curve is a(n)________ curve because it represents the relationship between price level and the quantity of real GDP supplied,two items that are ________ correlated.

Which of the following best describes the effect on the aggregate supply curve if political negotiations result in a substantial decrease in the price of oil?

If firms' expectations about the future become pessimistic so that they think future profits will be lower,then

During 2014,a country reports that its price level fell and the money wage rate did not change.These changes led to

A rise in the price level ________ the buying power of money and ________ the quantity of real GDP demanded.

Cost-push inflation can be started by

Because there is a ________ relationship between the price level and the quantity of real GDP supplied,the aggregate supply curve is ________ curve.

The table gives the aggregate demand and aggregate supply schedules for a nation. -Based on the table above,the equilibrium price level is

-In the figure above,the shift in the aggregate demand curve from AD₁ to AD₃ could be the result of an increase in

By itself,an increase in the price of oil shifts the

The quantity of real GDP supplied increases when the price level increases because

A demand-pull inflation initially is characterised by

Aggregate demand ________ if the expected inflation rate increases because ________.

Potential GDP

During an inflationary gap,

If the quantity of real GDP demanded is less than the quantity of real GDP supplied,then

Getting Started

The Australian and Global Economies

The Economic Problem

Demand and Supply

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Economic Growth

Finance,saving and Investment

Money,the Price Level and Inflation

Aggregate Expenditure Multiplier

The Short-Run Policy Trade Off

Fiscal Policy

Monetary Policy

International Trade Policy

International Finance

Filters

An increase in increases potential GDP and aggregate supply.

The aggregate supply curve is a(n) curve because it represents the relationship between price level and the quantity of real GDP supplied,two items that are correlated.

A rise in the price level the buying power of money and the quantity of real GDP demanded.

Because there is a relationship between the price level and the quantity of real GDP supplied,the aggregate supply curve is curve.

Aggregate demand if the expected inflation rate increases because .