Question 1

Which statement best characterizes why an aggregate demand curve slopes downward?

Accepted Answer

A)  because a decrease in the price level decreases the real value of household wealth 
B)  because a decrease in the domestic price level increases imports 
C)  because an increase in the price level leads to a decrease in demand for money, which decreases interest rates 
D)  because a decrease in the domestic price level increases exports 
A)  because a decrease in the price level decreases the real value of household wealth 
B)  because a decrease in the domestic price level increases imports 
C)  because an increase in the price level leads to a decrease in demand for money, which decreases interest rates 
D)  because a decrease in the domestic price level increases exports

Question 2

-Refer to the graphs in the exhibit.What happens to the equilibrium price level in period 1 as the aggregate demand curve shifts from AD to AD'?

Accepted Answer

A)  It falls from 4 to 1. 
B)  It falls from 4 to 3. 
C)  It rises from 3 to 4. 
D)  It rises from 1 to 4. 
A)  It falls from 4 to 1. 
B)  It falls from 4 to 3. 
C)  It rises from 3 to 4. 
D)  It rises from 1 to 4.

Question 3

Which of the following best describes the equilibrium of aggregate supply and aggregate demand?

Accepted Answer

A)  a situation in which the slope of aggregate demand equals the slope of aggregate supply 
B)  a situation in which quantity demanded exceeds quantity supplied 
C)  a situation in which quantity demanded equals quantity supplied at a unique price level 
D)  a situation in which quantity supplied exceeds quantity demanded at a unique price level 
A)  a situation in which the slope of aggregate demand equals the slope of aggregate supply 
B)  a situation in which quantity demanded exceeds quantity supplied 
C)  a situation in which quantity demanded equals quantity supplied at a unique price level 
D)  a situation in which quantity supplied exceeds quantity demanded at a unique price level

Question 4

Which of the following could be a leading economic indicator?

Accepted Answer

A)  interest rates 
B)  the unemployment rate 
C)  personal income 
D)  unsold goods 
A)  interest rates 
B)  the unemployment rate 
C)  personal income 
D)  unsold goods

Question 5

What is the ultimate objective of macroeconomics?

Accepted Answer

A)  to reduce the unemployment rate 
B)  to stabilize the economy's growth rate 
C)  to develop and test theories about how the overall economy works 
D)  to improve the international competitiveness of Canadian financial markets 
A)  to reduce the unemployment rate 
B)  to stabilize the economy's growth rate 
C)  to develop and test theories about how the overall economy works 
D)  to improve the international competitiveness of Canadian financial markets

Question 6

-Refer to the graphs in the exhibit.From the beginning of period 1 to the end of period 2, what happened to real GDP?

Accepted Answer

A)  It increased from $6,000 to $10,000 and stayed there. 
B)  It decreased from $10,000 to $6,000 and stayed there. 
C)  It decreased from $10,000 to $,6,000 in period 1, and it increased from $6,000 to $10,000 in period 2. 
D)  It increased from $6,000 to $10,000 in period 1, and it decreased from $10,000 to $6,000 in period 2. 
A)  It increased from $6,000 to $10,000 and stayed there. 
B)  It decreased from $10,000 to $6,000 and stayed there. 
C)  It decreased from $10,000 to $,6,000 in period 1, and it increased from $6,000 to $10,000 in period 2. 
D)  It increased from $6,000 to $10,000 in period 1, and it decreased from $10,000 to $6,000 in period 2.

Question 7

If GDP rises, what happens to income and expenditure?

Accepted Answer

A)  Income must rise and expenditure must rise. 
B)  Income must fall and expenditure must fall. 
C)  Income must rise, but expenditure may rise or fall. 
D)  Expenditure must rise, but income may rise or fall. 
A)  Income must rise and expenditure must rise. 
B)  Income must fall and expenditure must fall. 
C)  Income must rise, but expenditure may rise or fall. 
D)  Expenditure must rise, but income may rise or fall.

Question 8

Which of the following would indicate the beginnings of an expansion of the economy?

Accepted Answer

A)  Fewer new firms are being started. 
B)  Stock market prices are declining. 
C)  Consumer confidence is improving. 
D)  Housing construction is slowing. 
A)  Fewer new firms are being started. 
B)  Stock market prices are declining. 
C)  Consumer confidence is improving. 
D)  Housing construction is slowing.

Question 9

What is the definition of a depression?

Accepted Answer

A)  a mild reduction in total production coupled with a rising unemployment rate that lasts for several years 
B)  a decline in total production that lasts less than 6 months 
C)  a severe fall in stock prices that causes financial panic and lasts several years 
D)  a severe reduction in total production coupled with high unemployment that lasts several years 
A)  a mild reduction in total production coupled with a rising unemployment rate that lasts for several years 
B)  a decline in total production that lasts less than 6 months 
C)  a severe fall in stock prices that causes financial panic and lasts several years 
D)  a severe reduction in total production coupled with high unemployment that lasts several years

Question 10

How did Keynes propose that government should shock the economy out of the Great Depression?

Accepted Answer

A)  by increasing aggregate supply 
B)  by increasing aggregate demand 
C)  by raising prices in order that firms could earn higher profits and employ more people 
D)  by reducing prices in order that people could afford to buy more goods and services 
A)  by increasing aggregate supply 
B)  by increasing aggregate demand 
C)  by raising prices in order that firms could earn higher profits and employ more people 
D)  by reducing prices in order that people could afford to buy more goods and services

Question 11

According to Keynes, what does the term "animal spirits" refer to?

Accepted Answer

A)  unstable investment spending 
B)  unstable consumption spending 
C)  unstable government spending 
D)  unstable exports 
A)  unstable investment spending 
B)  unstable consumption spending 
C)  unstable government spending 
D)  unstable exports

Question 12

Why are Keynesian policies ineffective at combating stagflation?

Accepted Answer

A)  because stagflation is caused by budget surpluses 
B)  because stagflation is caused by decreases in aggregate supply 
C)  because stagflation is caused by trade deficits 
D)  because stagflation is caused by trade surpluses 
A)  because stagflation is caused by budget surpluses 
B)  because stagflation is caused by decreases in aggregate supply 
C)  because stagflation is caused by trade deficits 
D)  because stagflation is caused by trade surpluses

Question 13

Which of the following describes a flow variable?

Accepted Answer

A)  You own $5,000 worth of government bonds. 
B)  You own a $100,000 house. 
C)  You own a coin collection valued at $10,000. 
D)  You earn $500 per week. 
A)  You own $5,000 worth of government bonds. 
B)  You own a $100,000 house. 
C)  You own a coin collection valued at $10,000. 
D)  You earn $500 per week.

Question 14

What is aggregate output?

Accepted Answer

A)  the total amount of goods and services produced during a given period in the economy 
B)  only the total amount produced of goods during a given period in the economy 
C)  the relationship between the price level and the quantity of output demanded during a given period in the economy 
D)  the relationship between the price level and the quantity of output supplied during a given period in the economy 
A)  the total amount of goods and services produced during a given period in the economy 
B)  only the total amount produced of goods during a given period in the economy 
C)  the relationship between the price level and the quantity of output demanded during a given period in the economy 
D)  the relationship between the price level and the quantity of output supplied during a given period in the economy

Question 15

If all firms expect greater demand for their products or services, they will hire more resources.What will the economy experience in this case?

Accepted Answer

A)  recession 
B)  growth 
C)  federal budget deficits 
D)  stagnation 
A)  recession 
B)  growth 
C)  federal budget deficits 
D)  stagnation

Question 16

An economic variable can be measured in units of time, such as spending per year.What is this economic variable known as?

Accepted Answer

A)  as a stock variable 
B)  as a periodic variable 
C)  as an expectations variable 
D)  as a flow variable 
A)  as a stock variable 
B)  as a periodic variable 
C)  as an expectations variable 
D)  as a flow variable

Question 17

Which statement about economic fluctuations best characterizes how nations interact with each other?

Accepted Answer

A)  Economic fluctuations in one nation are usually independent of economic fluctuations in its major trading partner nations. 
B)  Economic fluctuations in one nation are usually independent of economic fluctuations in bordering nations. 
C)  Economic fluctuations in one nation are often linked to economic fluctuations in other economies. 
D)  Economic fluctuations in one nation are linked internationally such that that a recession in one nation means an expansion in the economy of its major trading partner. 
A)  Economic fluctuations in one nation are usually independent of economic fluctuations in its major trading partner nations. 
B)  Economic fluctuations in one nation are usually independent of economic fluctuations in bordering nations. 
C)  Economic fluctuations in one nation are often linked to economic fluctuations in other economies. 
D)  Economic fluctuations in one nation are linked internationally such that that a recession in one nation means an expansion in the economy of its major trading partner.

Question 18

Suppose the wealth of consumers increases substantially.How would this be reflected in the aggregate demand curve?

Accepted Answer

A)  The aggregate demand curve would shift outward. 
B)  The aggregate demand curve would NOT change. 
C)  The aggregate demand curve would shift inward. 
D)  The aggregate demand curve would become vertical. 
A)  The aggregate demand curve would shift outward. 
B)  The aggregate demand curve would NOT change. 
C)  The aggregate demand curve would shift inward. 
D)  The aggregate demand curve would become vertical.

Question 19

Why is the aggregate demand curve downward sloping?

Accepted Answer

A)  because, as prices fall, nominal income rises and so does the demand for real goods and services. 
B)  because rising prices reduce people's wealth, thereby reducing spending 
C)  because the government decides to spend less to increase the price level 
D)  because, as prices fall, domestically produced goods become more expensive relative to foreign-produced products, which increases production 
A)  because, as prices fall, nominal income rises and so does the demand for real goods and services. 
B)  because rising prices reduce people's wealth, thereby reducing spending 
C)  because the government decides to spend less to increase the price level 
D)  because, as prices fall, domestically produced goods become more expensive relative to foreign-produced products, which increases production

Question 20

-Refer to the graph in the exhibit.Which line represents aggregate supply?

Accepted Answer

A)  line a 
B)  line b 
C)  line c 
D)  line d 
A)  line a 
B)  line b 
C)  line c 
D)  line d

Which statement best characterizes why an aggregate demand curve slopes downward?

-Refer to the graphs in the exhibit.What happens to the equilibrium price level in period 1 as the aggregate demand curve shifts from AD to AD'?

Which of the following best describes the equilibrium of aggregate supply and aggregate demand?

Which of the following could be a leading economic indicator?

What is the ultimate objective of macroeconomics?

-Refer to the graphs in the exhibit.From the beginning of period 1 to the end of period 2, what happened to real GDP?

If GDP rises, what happens to income and expenditure?

Which of the following would indicate the beginnings of an expansion of the economy?

What is the definition of a depression?

How did Keynes propose that government should shock the economy out of the Great Depression?

According to Keynes, what does the term "animal spirits" refer to?

Why are Keynesian policies ineffective at combating stagflation?

Which of the following describes a flow variable?

What is aggregate output?

If all firms expect greater demand for their products or services, they will hire more resources.What will the economy experience in this case?

An economic variable can be measured in units of time, such as spending per year.What is this economic variable known as?

Which statement about economic fluctuations best characterizes how nations interact with each other?

Suppose the wealth of consumers increases substantially.How would this be reflected in the aggregate demand curve?

Why is the aggregate demand curve downward sloping?

-Refer to the graph in the exhibit.Which line represents aggregate supply?

The Art and Science of Economic Analysis

Economic Tools and Economic Systems

Economic Decision Makers

Demand, Supply, and Markets

Algebraic Approach to Demand, Supply, and Equilibrium

Tracking the Canadian Economy

Unemployment and Inflation

Productivity and Growth

Aggregate Expenditure and Aggregate Demand

Aggregate Supply

Fiscal Policy

Money and the Financial System

Banking and the Money Supply

Monetary Theory and Policy in an Open Economy

Macro Policy Debate: Active or Passive

International Finance

International Trade

Economic Development

Understanding Graphs

Filters

Exam 6: Introduction to Macroeconomics

Which statement best characterizes why an aggregate demand curve slopes downward?

-Refer to the graphs in the exhibit.What happens to the equilibrium price level in period 1 as the aggregate demand curve shifts from AD to AD'?

Which of the following best describes the equilibrium of aggregate supply and aggregate demand?

Which of the following could be a leading economic indicator?

What is the ultimate objective of macroeconomics?

-Refer to the graphs in the exhibit.From the beginning of period 1 to the end of period 2, what happened to real GDP?

If GDP rises, what happens to income and expenditure?

Which of the following would indicate the beginnings of an expansion of the economy?

What is the definition of a depression?

How did Keynes propose that government should shock the economy out of the Great Depression?

According to Keynes, what does the term "animal spirits" refer to?

Why are Keynesian policies ineffective at combating stagflation?

Which of the following describes a flow variable?

What is aggregate output?

If all firms expect greater demand for their products or services, they will hire more resources.What will the economy experience in this case?

An economic variable can be measured in units of time, such as spending per year.What is this economic variable known as?

Which statement about economic fluctuations best characterizes how nations interact with each other?

Suppose the wealth of consumers increases substantially.How would this be reflected in the aggregate demand curve?

Why is the aggregate demand curve downward sloping?

-Refer to the graph in the exhibit.Which line represents aggregate supply?

The Art and Science of Economic Analysis

Economic Tools and Economic Systems

Economic Decision Makers

Demand, Supply, and Markets

Algebraic Approach to Demand, Supply, and Equilibrium

Tracking the Canadian Economy

Unemployment and Inflation

Productivity and Growth

Aggregate Expenditure and Aggregate Demand

Aggregate Supply

Fiscal Policy

Money and the Financial System

Banking and the Money Supply

Monetary Theory and Policy in an Open Economy

Macro Policy Debate: Active or Passive

International Finance

International Trade

Economic Development

Understanding Graphs

Filters