Question 1

-Refer to the table in the exhibit.Consider the aggregate demand and the aggregate supply schedule #2.What is the equilibrium output level and price level?

Accepted Answer

A)  Output is $7.00, and price level is 110. 
B)  Output is $6.50, and price level is 120. 
C)  Output is $6.00, and price level is 130. 
D)  Output is $5.50, and price level is 140. 
A)  Output is $7.00, and price level is 110. 
B)  Output is $6.50, and price level is 120. 
C)  Output is $6.00, and price level is 130. 
D)  Output is $5.50, and price level is 140.

Question 2

What does the real wage represent?

Accepted Answer

A)  the quantity of goods and services a worker can purchase in exchange for performing work 
B)  the dollar value of the goods and services a worker can purchase in exchange for performing work 
C)  a worker's nominal wage minus taxes paid on wages 
D)  the actual amount of income a worker receives after deductions for such things as taxes and insurance 
A)  the quantity of goods and services a worker can purchase in exchange for performing work 
B)  the dollar value of the goods and services a worker can purchase in exchange for performing work 
C)  a worker's nominal wage minus taxes paid on wages 
D)  the actual amount of income a worker receives after deductions for such things as taxes and insurance

Question 3

Why might a rising price level in the short run create an incentive for firms to increase production?

Accepted Answer

A)  because costs of production will increase 
B)  because total sales revenue will decrease 
C)  because profits will increase 
D)  because costs of production will increase faster than total revenue 
A)  because costs of production will increase 
B)  because total sales revenue will decrease 
C)  because profits will increase 
D)  because costs of production will increase faster than total revenue

Question 4

Suppose the actual price level exceeds the expected price level reflected in long-term contracts.How will firms respond?

Accepted Answer

A)  Firms will find production more profitable than they had expected, and will increase the quantity of output supplied. 
B)  Firms will find production less profitable than they had expected, and will decrease the quantity of output supplied. 
C)  Firms will find production more profitable than they had expected, and will decrease the quantity of output supplied. 
D)  Firms will find production less profitable than they had expected, and will increase the quantity of output supplied. 
A)  Firms will find production more profitable than they had expected, and will increase the quantity of output supplied. 
B)  Firms will find production less profitable than they had expected, and will decrease the quantity of output supplied. 
C)  Firms will find production more profitable than they had expected, and will decrease the quantity of output supplied. 
D)  Firms will find production less profitable than they had expected, and will increase the quantity of output supplied.

Question 5

-Refer to the table in the exhibit.Consider the aggregate demand and aggregate supply schedule #1.What is the equilibrium price level?

Accepted Answer

A)  110 
B)  120 
C)  130 
D)  140 
A)  110 
B)  120 
C)  130 
D)  140

Question 6

What is the definition of stagflation?

Accepted Answer

A)  decreased output accompanied by a higher price level 
B)  decreased output accompanied by a lower price level 
C)  increased output accompanied by a higher price level 
D)  increased output accompanied by a lower price level 
A)  decreased output accompanied by a higher price level 
B)  decreased output accompanied by a lower price level 
C)  increased output accompanied by a higher price level 
D)  increased output accompanied by a lower price level

Question 7

-Refer to the graph in the exhibit.Suppose the economy is at point M.Which of the following characterizes the actual price level and the resulting gap?

Accepted Answer

A)  The actual price level is lower than expected, with a $200 billion recessionary gap. 
B)  The actual price level is higher than expected, with a $200 billion recessionary gap. 
C)  The actual price level is lower than expected, with a $200 billion expansionary gap. 
D)  The actual price level is higher than expected, with a $200 billion expansionary gap. 
A)  The actual price level is lower than expected, with a $200 billion recessionary gap. 
B)  The actual price level is higher than expected, with a $200 billion recessionary gap. 
C)  The actual price level is lower than expected, with a $200 billion expansionary gap. 
D)  The actual price level is higher than expected, with a $200 billion expansionary gap.

Question 8

On what does the steepness of the short-run aggregate supply curve primarily depend?

Accepted Answer

A)  on the length of time for which resource prices are fixed 
B)  on the length of time for which output prices are fixed 
C)  on the difference between the expected price level and the actual price level 
D)  on how quickly production costs increase as output expands 
A)  on the length of time for which resource prices are fixed 
B)  on the length of time for which output prices are fixed 
C)  on the difference between the expected price level and the actual price level 
D)  on how quickly production costs increase as output expands

Question 9

Suppose global pollution causes climatic changes that permanently harm crop production worldwide.What would aggregate supply and demand analysis lead an economist to expect?

Accepted Answer

A)  increases in the price level 
B)  decreases in the price level 
C)  an outward shift of the aggregate demand curve and an outward shift of the supply curve 
D)  a leftward shift of the aggregate demand curve along a vertical aggregate supply curve 
A)  increases in the price level 
B)  decreases in the price level 
C)  an outward shift of the aggregate demand curve and an outward shift of the supply curve 
D)  a leftward shift of the aggregate demand curve along a vertical aggregate supply curve

Question 10

Which of the following characterizes an economy that is at its potential output level?

Accepted Answer

A)  Firms' and workers' expectations about the price level are NOT realized. 
B)  The nominal wage is NOT a good measure of the expected real wage. 
C)  The unemployment rate is about 2 percent. 
D)  The economy is producing its minimum sustainable output. 
A)  Firms' and workers' expectations about the price level are NOT realized. 
B)  The nominal wage is NOT a good measure of the expected real wage. 
C)  The unemployment rate is about 2 percent. 
D)  The economy is producing its minimum sustainable output.

Question 11

Which of the following would be evidence that a recessionary gap exists?

Accepted Answer

A)  rapid deflation during a period in which plant capacity utilization is below average 
B)  steady price level, and a 5 percent unemployment rate 
C)  less help-wanted advertising than usual, and a lower consumer price index than expected 
D)  markedly higher inflation, and the TSX at record levels 
A)  rapid deflation during a period in which plant capacity utilization is below average 
B)  steady price level, and a 5 percent unemployment rate 
C)  less help-wanted advertising than usual, and a lower consumer price index than expected 
D)  markedly higher inflation, and the TSX at record levels

Question 12

In the short run, when will real and nominal GDP both decrease?

Accepted Answer

A)  whenever aggregate demand decreases, but NOT always when aggregate supply decreases 
B)  whenever aggregate supply decreases, but NOT always when aggregate demand decreases 
C)  whenever aggregate demand decreases or aggregate supply decreases 
D)  whenever aggregate supply decreases along a constant aggregate demand curve 
A)  whenever aggregate demand decreases, but NOT always when aggregate supply decreases 
B)  whenever aggregate supply decreases, but NOT always when aggregate demand decreases 
C)  whenever aggregate demand decreases or aggregate supply decreases 
D)  whenever aggregate supply decreases along a constant aggregate demand curve

Question 13

Suppose nominal wages are sticky in the downward direction.If no government intervention occurs, how may unemployment be affected in the long run?

Accepted Answer

A)  Unemployment may persist for long periods of time. 
B)  Shortages of labour may persist for long periods of time. 
C)  Increases in real wages will occur too quickly to affect unemployment. 
D)  Nominal wage increases will help reduce unemployment. 
A)  Unemployment may persist for long periods of time. 
B)  Shortages of labour may persist for long periods of time. 
C)  Increases in real wages will occur too quickly to affect unemployment. 
D)  Nominal wage increases will help reduce unemployment.

Question 14

Which of the following describes the short-run aggregate supply curve?

Accepted Answer

A)  It shows an inverse relationship between the price level and real GDP. 
B)  It shows the relationship between the price of labour and the aggregate quantity of labour that workers supply, other things constant. 
C)  It shows the relationship between the interest rate and the quantity of capital goods that firms supply, other things constant. 
D)  It shows the relationship between the price level and the quantity of aggregate output that firms supply, other things constant. 
A)  It shows an inverse relationship between the price level and real GDP. 
B)  It shows the relationship between the price of labour and the aggregate quantity of labour that workers supply, other things constant. 
C)  It shows the relationship between the interest rate and the quantity of capital goods that firms supply, other things constant. 
D)  It shows the relationship between the price level and the quantity of aggregate output that firms supply, other things constant.

Question 15

Which of the following supply shocks would shift the long-run aggregate supply curve outward?

Accepted Answer

A)  an increase in gasoline taxes 
B)  an increase in the cost of raw materials 
C)  an increase in the amount and cost of government regulation 
D)  an increase in agricultural output 
A)  an increase in gasoline taxes 
B)  an increase in the cost of raw materials 
C)  an increase in the amount and cost of government regulation 
D)  an increase in agricultural output

Question 16

Suppose the economy is at its potential output level.Which of the following best characterizes the unemployment rate?

Accepted Answer

A)  It is at the natural rate. 
B)  It is greater than its natural rate. 
C)  It is less than its natural rate. 
D)  It would include only those people who do NOT have enough work. 
A)  It is at the natural rate. 
B)  It is greater than its natural rate. 
C)  It is less than its natural rate. 
D)  It would include only those people who do NOT have enough work.

-Refer to the table in the exhibit.Consider the aggregate demand and the aggregate supply schedule #2.What is the equilibrium output level and price level?

What does the real wage represent?

Why might a rising price level in the short run create an incentive for firms to increase production?

Suppose the actual price level exceeds the expected price level reflected in long-term contracts.How will firms respond?

-Refer to the table in the exhibit.Consider the aggregate demand and aggregate supply schedule #1.What is the equilibrium price level?

What is the definition of stagflation?

-Refer to the graph in the exhibit.Suppose the economy is at point M.Which of the following characterizes the actual price level and the resulting gap?

On what does the steepness of the short-run aggregate supply curve primarily depend?

Suppose global pollution causes climatic changes that permanently harm crop production worldwide.What would aggregate supply and demand analysis lead an economist to expect?

Which of the following characterizes an economy that is at its potential output level?

Which of the following would be evidence that a recessionary gap exists?

In the short run, when will real and nominal GDP both decrease?

Suppose nominal wages are sticky in the downward direction.If no government intervention occurs, how may unemployment be affected in the long run?

Which of the following describes the short-run aggregate supply curve?

Which of the following supply shocks would shift the long-run aggregate supply curve outward?

Suppose the economy is at its potential output level.Which of the following best characterizes the unemployment rate?

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 table in the exhibit.Consider the aggregate demand and the aggregate supply schedule #2.What is the equilibrium output level and price level?

What does the real wage represent?

Why might a rising price level in the short run create an incentive for firms to increase production?

Suppose the actual price level exceeds the expected price level reflected in long-term contracts.How will firms respond?

-Refer to the table in the exhibit.Consider the aggregate demand and aggregate supply schedule #1.What is the equilibrium price level?

What is the definition of stagflation?

-Refer to the graph in the exhibit.Suppose the economy is at point M.Which of the following characterizes the actual price level and the resulting gap?

On what does the steepness of the short-run aggregate supply curve primarily depend?

Suppose global pollution causes climatic changes that permanently harm crop production worldwide.What would aggregate supply and demand analysis lead an economist to expect?

Which of the following characterizes an economy that is at its potential output level?

Which of the following would be evidence that a recessionary gap exists?

In the short run, when will real and nominal GDP both decrease?

Suppose nominal wages are sticky in the downward direction.If no government intervention occurs, how may unemployment be affected in the long run?

Which of the following describes the short-run aggregate supply curve?

Which of the following supply shocks would shift the long-run aggregate supply curve outward?

Suppose the economy is at its potential output level.Which of the following best characterizes the unemployment rate?

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