Question 1

-Refer to the graph in the exhibit.Suppose P₃ is the prevailing price level.How will prices be affected in the long run, assuming a hands-off policy by government?

Accepted Answer

A)  The price level will rise. 
B)  The price level will fall. 
C)  The price level will remain the same. 
D)  The price level will first rise, and then fall. 
A)  The price level will rise. 
B)  The price level will fall. 
C)  The price level will remain the same. 
D)  The price level will first rise, and then fall.

Question 2

Who makes the billions of production decisions reflected in aggregate supply?

Accepted Answer

A)  consumers 
B)  all households and firms 
C)  only the largest firms and the largest households 
D)  resource suppliers and firms 
A)  consumers 
B)  all households and firms 
C)  only the largest firms and the largest households 
D)  resource suppliers and firms

Question 3

Suppose the economy is experiencing an expansionary gap.Which of the following will occur in the long run?

Accepted Answer

A)  Workers will negotiate nominal wage increases that will shift the SRAS curve to the left. 
B)  Workers will negotiate nominal wage increases that will shift the SRAS curve to the right. 
C)  Employers will negotiate lower nominal wages, relative to prices, that will shift the SRAS curve to the right. 
D)  Employers will negotiate lower nominal wages, relative to prices, that will shift the SRAS curve to the left. 
A)  Workers will negotiate nominal wage increases that will shift the SRAS curve to the left. 
B)  Workers will negotiate nominal wage increases that will shift the SRAS curve to the right. 
C)  Employers will negotiate lower nominal wages, relative to prices, that will shift the SRAS curve to the right. 
D)  Employers will negotiate lower nominal wages, relative to prices, that will shift the SRAS curve to the left.

Question 4

Why is the expected price level significant?

Accepted Answer

A)  because it is the equilibrium price level in the short run 
B)  because it determines the actual price level in the short run 
C)  because it determines the actual price level in the long run 
D)  because firms and resource owners make long-term agreements based on the expected price level 
A)  because it is the equilibrium price level in the short run 
B)  because it determines the actual price level in the short run 
C)  because it determines the actual price level in the long run 
D)  because firms and resource owners make long-term agreements based on the expected price level

Question 5

Which of the following is a crucial factor in determining whether aggregate supply shifts quickly or slowly to restore equilibrium at potential output?

Accepted Answer

A)  how quickly planned investment spending adjusts to changes in population growth 
B)  how quickly planned consumption spending adjusts to changes in the price level and nominal wages 
C)  how quickly technology changes to increase aggregate supply 
D)  how quickly real wages adjust to restore full employment in the labour market 
A)  how quickly planned investment spending adjusts to changes in population growth 
B)  how quickly planned consumption spending adjusts to changes in the price level and nominal wages 
C)  how quickly technology changes to increase aggregate supply 
D)  how quickly real wages adjust to restore full employment in the labour market

Question 6

Which of the following would shift the long-run aggregate supply curve to the right?

Accepted Answer

A)  a decline in the size of the labour force 
B)  a reduction in the quality of the labour force 
C)  a reduction in the cost of using computers 
D)  an increase in aggregate demand 
A)  a decline in the size of the labour force 
B)  a reduction in the quality of the labour force 
C)  a reduction in the cost of using computers 
D)  an increase in aggregate demand

Question 7

What is the main effect of an increase in the capital stock?

Accepted Answer

A)  a rightward shift of the long-run aggregate supply curve 
B)  a leftward shift of the long-run aggregate supply curve 
C)  a rightward shift of the aggregate demand curve 
D)  a leftward shift of the aggregate demand curve 
A)  a rightward shift of the long-run aggregate supply curve 
B)  a leftward shift of the long-run aggregate supply curve 
C)  a rightward shift of the aggregate demand curve 
D)  a leftward shift of the aggregate demand curve

Question 8

How would an adverse supply shock shift the aggregate supply curves?

Accepted Answer

A)  Only the short-run aggregate supply curve would shift outward. 
B)  Only the long-run aggregate supply curve would shift outward. 
C)  Only the long-run aggregate supply curve would shift inward. 
D)  The short-run aggregate supply curve would shift inward, and the long-run aggregate supply curve would shift inward. 
A)  Only the short-run aggregate supply curve would shift outward. 
B)  Only the long-run aggregate supply curve would shift outward. 
C)  Only the long-run aggregate supply curve would shift inward. 
D)  The short-run aggregate supply curve would shift inward, and the long-run aggregate supply curve would shift inward.

Question 9

Suppose the economy is initially in long-run equilibrium and then it experiences a supply shock in the form of sharply higher energy prices.How will the short-run and long-run aggregate supply curves be affected?

Accepted Answer

A)  The short-run aggregate supply curve shifts leftward, but the long-run aggregate supply curve does NOT shift. 
B)  The short-run aggregate supply curve shifts rightward, and the long-run aggregate supply curve shifts rightward. 
C)  The short-run aggregate supply curve does NOT shift, and the long-run aggregate supply curve shifts rightward. 
D)  The short-run aggregate supply curve shifts rightward, but the long-run aggregate supply curve does NOT shift. 
A)  The short-run aggregate supply curve shifts leftward, but the long-run aggregate supply curve does NOT shift. 
B)  The short-run aggregate supply curve shifts rightward, and the long-run aggregate supply curve shifts rightward. 
C)  The short-run aggregate supply curve does NOT shift, and the long-run aggregate supply curve shifts rightward. 
D)  The short-run aggregate supply curve shifts rightward, but the long-run aggregate supply curve does NOT shift.

Question 10

-Refer to the graph in the exhibit.Which of the following could have caused the shift of the curve?

Accepted Answer

A)  a decrease in the size of the labour force 
B)  a decrease in the price level 
C)  a positive level of net investment 
D)  an increase in autonomous consumption 
A)  a decrease in the size of the labour force 
B)  a decrease in the price level 
C)  a positive level of net investment 
D)  an increase in autonomous consumption

Question 11

Which of the following best describes how nominal wages will be affected in the long run?

Accepted Answer

A)  Nominal wages and real wages tend to be equal. 
B)  Nominal wages are more flexible downward than upward. 
C)  Nominal wages are more flexible than prices. 
D)  Sustained and continuous unemployment suggests nominal wages do NOT fall quickly. 
A)  Nominal wages and real wages tend to be equal. 
B)  Nominal wages are more flexible downward than upward. 
C)  Nominal wages are more flexible than prices. 
D)  Sustained and continuous unemployment suggests nominal wages do NOT fall quickly.

Question 12

What does the potential output of an economy represent?

Accepted Answer

A)  the level of output produced when the real wage equals the nominal wage 
B)  the level of output produced when the price level is constant 
C)  the level of output produced when the expected price level equals the unemployment rate 
D)  the level of output produced when the expected price level equals the actual price level 
A)  the level of output produced when the real wage equals the nominal wage 
B)  the level of output produced when the price level is constant 
C)  the level of output produced when the expected price level equals the unemployment rate 
D)  the level of output produced when the expected price level equals the actual price level

Question 13

Which of the following would shift the long-run aggregate supply curve to the left?

Accepted Answer

A)  an increase in the size of the labour force 
B)  a reduction in the quality of the labour force 
C)  a reduction in the cost of using computers 
D)  a decrease in the price level 
A)  an increase in the size of the labour force 
B)  a reduction in the quality of the labour force 
C)  a reduction in the cost of using computers 
D)  a decrease in the price level

Question 14

Which of the following will cause potential output to decrease?

Accepted Answer

A)  if the price level increases 
B)  if the price level decreases 
C)  if technological change increases labour productivity 
D)  if workers choose shorter work schedules in order to enjoy more leisure time 
A)  if the price level increases 
B)  if the price level decreases 
C)  if technological change increases labour productivity 
D)  if workers choose shorter work schedules in order to enjoy more leisure time

Question 15

-Refer to the graph in the exhibit.What is the term for the distance between Y₁ and Y₂?

Accepted Answer

A)  an expansionary gap 
B)  a recessionary gap 
C)  an increase in potential output 
D)  the natural rate of unemployment 
A)  an expansionary gap 
B)  a recessionary gap 
C)  an increase in potential output 
D)  the natural rate of unemployment

Question 16

Which of the following would cause the short-run aggregate supply curve to shift leftward?

Accepted Answer

A)  a drop in energy prices 
B)  workers opting for more leisure time and less time on the job 
C)  new investment spending that is greater than depreciation of the capital stock 
D)  a technological breakthrough, with widespread practical applications, that occurs in the microcomputer industry 
A)  a drop in energy prices 
B)  workers opting for more leisure time and less time on the job 
C)  new investment spending that is greater than depreciation of the capital stock 
D)  a technological breakthrough, with widespread practical applications, that occurs in the microcomputer industry

Question 17

Which pair of variables has a positive relationship in the short run?

Accepted Answer

A)  inflation and unemployment 
B)  inflation and real GDP 
C)  the actual price level and aggregate quantity supplied 
D)  the actual price level and unemployment 
A)  inflation and unemployment 
B)  inflation and real GDP 
C)  the actual price level and aggregate quantity supplied 
D)  the actual price level and unemployment

Question 18

What relationship is illustrated by the aggregate supply curve?

Accepted Answer

A)  the price of a particular good, and the quantity of that good supplied by all firms producing that good 
B)  the price of a particular good, and the quantity of that good supplied by the aggregate economy 
C)  the price level, and the quantity of all goods supplied in the economy 
D)  the price level, and the quantity purchased of all goods in the economy 
A)  the price of a particular good, and the quantity of that good supplied by all firms producing that good 
B)  the price of a particular good, and the quantity of that good supplied by the aggregate economy 
C)  the price level, and the quantity of all goods supplied in the economy 
D)  the price level, and the quantity purchased of all goods in the economy

Question 19

-Refer to the graph in the exhibit.Which of the following would represent a recessionary gap?

Accepted Answer

A)  Y₁ - Y₂ 
B)  Y₁ - Y₃ 
C)  Y₂ - Y₃ 
D)  Y₁ + Y₂ 
A)  Y₁ - Y₂ 
B)  Y₁ - Y₃ 
C)  Y₂ - Y₃ 
D)  Y₁ + Y₂

Question 20

Suppose the expected price level exceeds the actual price level.How will this affect production in the short run?

Accepted Answer

A)  Firms will increase production. 
B)  Firms will decrease production. 
C)  Firms will maintain production but increase prices. 
D)  Firms will maintain production but decrease prices. 
A)  Firms will increase production. 
B)  Firms will decrease production. 
C)  Firms will maintain production but increase prices. 
D)  Firms will maintain production but decrease prices.

-Refer to the graph in the exhibit.Suppose P₃ is the prevailing price level.How will prices be affected in the long run, assuming a hands-off policy by government?

Who makes the billions of production decisions reflected in aggregate supply?

Suppose the economy is experiencing an expansionary gap.Which of the following will occur in the long run?

Why is the expected price level significant?

Which of the following is a crucial factor in determining whether aggregate supply shifts quickly or slowly to restore equilibrium at potential output?

Which of the following would shift the long-run aggregate supply curve to the right?

What is the main effect of an increase in the capital stock?

How would an adverse supply shock shift the aggregate supply curves?

Suppose the economy is initially in long-run equilibrium and then it experiences a supply shock in the form of sharply higher energy prices.How will the short-run and long-run aggregate supply curves be affected?

-Refer to the graph in the exhibit.Which of the following could have caused the shift of the curve?

Which of the following best describes how nominal wages will be affected in the long run?

What does the potential output of an economy represent?

Which of the following would shift the long-run aggregate supply curve to the left?

Which of the following will cause potential output to decrease?

-Refer to the graph in the exhibit.What is the term for the distance between Y₁ and Y₂?

Which of the following would cause the short-run aggregate supply curve to shift leftward?

Which pair of variables has a positive relationship in the short run?

What relationship is illustrated by the aggregate supply curve?

-Refer to the graph in the exhibit.Which of the following would represent a recessionary gap?

Suppose the expected price level exceeds the actual price level.How will this affect production in the short run?

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

Introduction to Macroeconomics

Tracking the Canadian Economy

Unemployment and Inflation

Productivity and Growth

Aggregate Expenditure and Aggregate Demand

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

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Exam 11: Aggregate Supply

-Refer to the graph in the exhibit.Suppose P₃ is the prevailing price level.How will prices be affected in the long run, assuming a hands-off policy by government?

Who makes the billions of production decisions reflected in aggregate supply?

Suppose the economy is experiencing an expansionary gap.Which of the following will occur in the long run?

Why is the expected price level significant?

Which of the following is a crucial factor in determining whether aggregate supply shifts quickly or slowly to restore equilibrium at potential output?

Which of the following would shift the long-run aggregate supply curve to the right?

What is the main effect of an increase in the capital stock?

How would an adverse supply shock shift the aggregate supply curves?

Suppose the economy is initially in long-run equilibrium and then it experiences a supply shock in the form of sharply higher energy prices.How will the short-run and long-run aggregate supply curves be affected?

-Refer to the graph in the exhibit.Which of the following could have caused the shift of the curve?

Which of the following best describes how nominal wages will be affected in the long run?

What does the potential output of an economy represent?

Which of the following would shift the long-run aggregate supply curve to the left?

Which of the following will cause potential output to decrease?

-Refer to the graph in the exhibit.What is the term for the distance between Y₁ and Y₂?

Which of the following would cause the short-run aggregate supply curve to shift leftward?

Which pair of variables has a positive relationship in the short run?

What relationship is illustrated by the aggregate supply curve?

-Refer to the graph in the exhibit.Which of the following would represent a recessionary gap?

Suppose the expected price level exceeds the actual price level.How will this affect production in the short run?

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

Introduction to Macroeconomics

Tracking the Canadian Economy

Unemployment and Inflation

Productivity and Growth

Aggregate Expenditure and Aggregate Demand

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