Question 1

Which of the following situations will cause the LRAS to shift rightward?

Accepted Answer

A) when both an advance in technology and an increase in the capital stock occur 
B) when both a decrease in the capital stock and a decrease in the amount of labour available for production occur 
C) when both an increase in the capital stock and a decrease in the natural resources that are available for production occur 
D) when both an advance in technology and a decrease in the amount of labour available for production occur 
A) when both an advance in technology and an increase in the capital stock occur 
B) when both a decrease in the capital stock and a decrease in the amount of labour available for production occur 
C) when both an increase in the capital stock and a decrease in the natural resources that are available for production occur 
D) when both an advance in technology and a decrease in the amount of labour available for production occur A

Question 2

When does stagflation occur?

Accepted Answer

A) when real output rises and the price level rises 
B) when real output falls and the price level falls 
C) when real output rises and the price level falls 
D) when real output falls and the price level rises 
A) when real output rises and the price level rises 
B) when real output falls and the price level falls 
C) when real output rises and the price level falls 
D) when real output falls and the price level rises D

Question 3

What do demand-pull inflation and cost-push inflation cause?

Accepted Answer

A) Demand-pull inflation causes a recessionary gap, and cost-push inflation causes a recessionary gap. 
B) Demand-pull inflation and cost-push inflation both cause an inflationary gap. 
C) Demand-pull inflation causes an inflationary gap, and cost-push inflation causes a recessionary gap. 
D) Demand-pull inflation causes a recessionary gap, and cost-push inflation causes an inflationary gap. 
A) Demand-pull inflation causes a recessionary gap, and cost-push inflation causes a recessionary gap. 
B) Demand-pull inflation and cost-push inflation both cause an inflationary gap. 
C) Demand-pull inflation causes an inflationary gap, and cost-push inflation causes a recessionary gap. 
D) Demand-pull inflation causes a recessionary gap, and cost-push inflation causes an inflationary gap. C

Question 4

When there is a temporary sharp reduction in the price of oil,which curves will shift left?

Accepted Answer

A) neither SRAS nor LRAS 
B) SRAS 
C) LRAS 
D) both SRAS and LRAS 
A) neither SRAS nor LRAS 
B) SRAS 
C) LRAS 
D) both SRAS and LRAS

Question 5

In the Keynesian AE model,if the autonomous components of consumption,investment,government spending,and net export spending total $200 billion,and the MPS is 0.2,what will unplanned changes in inventory be when output is $1.010 trillion?

Accepted Answer

A) -$10 billion 
B) -$4 billion 
C) $4 billion 
D) $10 billion 
A) -$10 billion 
B) -$4 billion 
C) $4 billion 
D) $10 billion

Question 6

When SRAS and AD intersect at a real output level that is less than the natural level of real output,is the economy in equilibrium?

Accepted Answer

A) It is in short-run equilibrium, and real output will tend to rise from its current level as it adjusts to long-run equilibrium. 
B) It is in short-run disequilibrium, and real output will tend to fall from its current level as it adjusts to long-run equilibrium. 
C) It is in short-run equilibrium, and real output will tend to fall from its current level as it adjusts to long-run equilibrium. 
D) It is in short-run disequilibrium, and real output will tend to rise from its current level as it adjusts to long-run equilibrium. 
A) It is in short-run equilibrium, and real output will tend to rise from its current level as it adjusts to long-run equilibrium. 
B) It is in short-run disequilibrium, and real output will tend to fall from its current level as it adjusts to long-run equilibrium. 
C) It is in short-run equilibrium, and real output will tend to fall from its current level as it adjusts to long-run equilibrium. 
D) It is in short-run disequilibrium, and real output will tend to rise from its current level as it adjusts to long-run equilibrium.

Question 7

In the Keynesian AE model,what impact does an increase in real wealth have on AE?

Accepted Answer

A) It shifts AE down, increases inventories, and reduces output. 
B) It shifts AE up, increases inventories, and causes an increase in output. 
C) It shifts AE up, reduces inventories, and causes an increase in output. 
D) It shifts AE down, reduces inventories, and reduces output. 
A) It shifts AE down, increases inventories, and reduces output. 
B) It shifts AE up, increases inventories, and causes an increase in output. 
C) It shifts AE up, reduces inventories, and causes an increase in output. 
D) It shifts AE down, reduces inventories, and reduces output.

Question 8

When wages rise 15 percent,under which of the following circumstances will short-run aggregate supply increase?

Accepted Answer

A) if productivity is stable 
B) if productivity increases by 10 percent 
C) if productivity increases by 15 percent 
D) if productivity increases by 20 percent 
A) if productivity is stable 
B) if productivity increases by 10 percent 
C) if productivity increases by 15 percent 
D) if productivity increases by 20 percent

Question 9

If real output is currently greater than the natural level of real output,what impact will an increase in aggregate demand have on the market?

Accepted Answer

A) It will make the current recessionary gap smaller. 
B) It will make the current recessionary gap larger. 
C) It will make the current inflationary gap smaller. 
D) It will make the current inflationary gap larger. 
A) It will make the current recessionary gap smaller. 
B) It will make the current recessionary gap larger. 
C) It will make the current inflationary gap smaller. 
D) It will make the current inflationary gap larger.

Question 10

What would be the effect on short-run aggregate supply of a large,permanent reduction in the world supply of oil?

Accepted Answer

A) It would shift left (an increase in short-run aggregate supply). 
B) It would shift left (a decrease in short-run aggregate supply). 
C) It would shift right (a decrease in short-run aggregate supply). 
D) It would shift right (an increase in short-run aggregate supply). 
A) It would shift left (an increase in short-run aggregate supply). 
B) It would shift left (a decrease in short-run aggregate supply). 
C) It would shift right (a decrease in short-run aggregate supply). 
D) It would shift right (an increase in short-run aggregate supply).

Question 11

When output is higher than the intersection of the Keynesian AE and the 45 degree line,which of the following can we can expect to happen?

Accepted Answer

A) savings to be negative and consumption to fall 
B) inventories to rise and output to fall 
C) consumers to expect higher incomes and consumption to rise 
D) inventories to fall and output to rise 
A) savings to be negative and consumption to fall 
B) inventories to rise and output to fall 
C) consumers to expect higher incomes and consumption to rise 
D) inventories to fall and output to rise

Question 12

When SRAS and AD intersect at the natural level of real output,is the economy in equilibrium?

Accepted Answer

A) It is not necessarily in either short-run equilibrium or in long-run equilibrium. 
B) It is in short-run equilibrium and long-run equilibrium. 
C) It is in short-run equilibrium but not necessarily in long-run equilibrium. 
D) It is in long-run equilibrium but not necessarily in long-run equilibrium.ANS B 
A) It is not necessarily in either short-run equilibrium or in long-run equilibrium. 
B) It is in short-run equilibrium and long-run equilibrium. 
C) It is in short-run equilibrium but not necessarily in long-run equilibrium. 
D) It is in long-run equilibrium but not necessarily in long-run equilibrium.ANS B

Question 13

The long-run level of real GDP changes whenever the aggregate demand curve shifts.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A) a change in the wage rate paid to labour in the economy 
B) a change in technology in the economy 
C) a change in the cost of capital in the economy 
D) a change in the rental value of land in the economy 
A) a change in the wage rate paid to labour in the economy 
B) a change in technology in the economy 
C) a change in the cost of capital in the economy 
D) a change in the rental value of land in the economy

Question 15

If there was no profit effect,but there was a misperception effect in the short run,how would the SRAS and LRAS curve be drawn?

Accepted Answer

A) The SRAS and LRAS would both be vertical. 
B) The SRAS would be vertical and the LRAS would be upward sloping. 
C) The SRAS would be upward sloping and the LRAS would be vertical. 
D) The SRAS and LRAS would both be upward sloping. 
A) The SRAS and LRAS would both be vertical. 
B) The SRAS would be vertical and the LRAS would be upward sloping. 
C) The SRAS would be upward sloping and the LRAS would be vertical. 
D) The SRAS and LRAS would both be upward sloping.

Question 16

Figure 9-4
  
-Refer to Figure 9-4.Which of the following best describes the relationship between output and desired spending at Y₀?

Accepted Answer

A) Output is less than desired spending, and inventories will fall. 
B) Output is greater than desired spending, and inventories will rise. 
C) Output is less than desired spending, and governments must decrease spending. 
D) Output is greater than desired spending, and real wealth will fall. 
A) Output is less than desired spending, and inventories will fall. 
B) Output is greater than desired spending, and inventories will rise. 
C) Output is less than desired spending, and governments must decrease spending. 
D) Output is greater than desired spending, and real wealth will fall.

Question 17

Figure 9-1
  
-Refer to Figure 9-1.What would a shift from SRAS₀ to SRAS₁ result in?

Accepted Answer

A) a decrease in unemployment in the short run 
B) an increase in real gross domestic product in the short run 
C) an increase in the price level in the short run 
D) demand-pull inflation 
A) a decrease in unemployment in the short run 
B) an increase in real gross domestic product in the short run 
C) an increase in the price level in the short run 
D) demand-pull inflation

Question 18

Which of the following could begin an episode of demand-pull inflation?

Accepted Answer

A) a decrease in consumer optimism 
B) expectations of higher rates of return in investment 
C) an increase in the capital stock 
D) a slower rate of economic growth by a major trading partner country 
A) a decrease in consumer optimism 
B) expectations of higher rates of return in investment 
C) an increase in the capital stock 
D) a slower rate of economic growth by a major trading partner country

Question 19

What effect will the combination of a technological advance and a better-trained and educated workforce have on LRAS?

Accepted Answer

A) It will shift LRAS to the left. 
B) It will have an indeterminate effect on LRAS. 
C) It will shift LRAS to the right. 
D) It will leave LRAS unchanged. 
A) It will shift LRAS to the left. 
B) It will have an indeterminate effect on LRAS. 
C) It will shift LRAS to the right. 
D) It will leave LRAS unchanged.

Question 20

What impact will a temporary increase in the supply of a major input have on real output?

Accepted Answer

A) It will increase real output in both the short run and the long run. 
B) It will increase real output in the short run but not in the long run. 
C) It will decrease real output in the short run but not the long run. 
D) It will decrease real output in both the short run and the long run. 
A) It will increase real output in both the short run and the long run. 
B) It will increase real output in the short run but not in the long run. 
C) It will decrease real output in the short run but not the long run. 
D) It will decrease real output in both the short run and the long run.

Which of the following situations will cause the LRAS to shift rightward?

When does stagflation occur?

What do demand-pull inflation and cost-push inflation cause?

When there is a temporary sharp reduction in the price of oil,which curves will shift left?

In the Keynesian AE model,if the autonomous components of consumption,investment,government spending,and net export spending total $200 billion,and the MPS is 0.2,what will unplanned changes in inventory be when output is $1.010 trillion?

When SRAS and AD intersect at a real output level that is less than the natural level of real output,is the economy in equilibrium?

In the Keynesian AE model,what impact does an increase in real wealth have on AE?

When wages rise 15 percent,under which of the following circumstances will short-run aggregate supply increase?

If real output is currently greater than the natural level of real output,what impact will an increase in aggregate demand have on the market?

What would be the effect on short-run aggregate supply of a large,permanent reduction in the world supply of oil?

When output is higher than the intersection of the Keynesian AE and the 45 degree line,which of the following can we can expect to happen?

When SRAS and AD intersect at the natural level of real output,is the economy in equilibrium?

The long-run level of real GDP changes whenever the aggregate demand curve shifts.

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

If there was no profit effect,but there was a misperception effect in the short run,how would the SRAS and LRAS curve be drawn?

Figure 9-4 -Refer to Figure 9-4.Which of the following best describes the relationship between output and desired spending at Y₀?

Figure 9-1 -Refer to Figure 9-1.What would a shift from SRAS₀ to SRAS₁ result in?

Which of the following could begin an episode of demand-pull inflation?

What effect will the combination of a technological advance and a better-trained and educated workforce have on LRAS?

What impact will a temporary increase in the supply of a major input have on real output?

The Role and Method of Economics

Scarcity, trade-Offs, and Production Possibilities

Supply and Demand

Bringing Supply and Demand Together

Introduction to the Macroeconomy

Measuring Economic Performance

Economic Growth in the Global Economy

Aggregate Demand

Fiscal Policy

Money and the Banking System

The Bank of Canada

Monetary Policy

International Trade

International Finance

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Exam 9: Aggregate Supply and Macroeconomic Equilibrium

Which of the following situations will cause the LRAS to shift rightward?

When does stagflation occur?

What do demand-pull inflation and cost-push inflation cause?

When there is a temporary sharp reduction in the price of oil,which curves will shift left?

In the Keynesian AE model,if the autonomous components of consumption,investment,government spending,and net export spending total $200 billion,and the MPS is 0.2,what will unplanned changes in inventory be when output is $1.010 trillion?

When SRAS and AD intersect at a real output level that is less than the natural level of real output,is the economy in equilibrium?

In the Keynesian AE model,what impact does an increase in real wealth have on AE?

When wages rise 15 percent,under which of the following circumstances will short-run aggregate supply increase?

If real output is currently greater than the natural level of real output,what impact will an increase in aggregate demand have on the market?

What would be the effect on short-run aggregate supply of a large,permanent reduction in the world supply of oil?

When output is higher than the intersection of the Keynesian AE and the 45 degree line,which of the following can we can expect to happen?

When SRAS and AD intersect at the natural level of real output,is the economy in equilibrium?

The long-run level of real GDP changes whenever the aggregate demand curve shifts.

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

If there was no profit effect,but there was a misperception effect in the short run,how would the SRAS and LRAS curve be drawn?

Figure 9-4 -Refer to Figure 9-4.Which of the following best describes the relationship between output and desired spending at Y₀?

Figure 9-1 -Refer to Figure 9-1.What would a shift from SRAS₀ to SRAS₁ result in?

Which of the following could begin an episode of demand-pull inflation?

What effect will the combination of a technological advance and a better-trained and educated workforce have on LRAS?

What impact will a temporary increase in the supply of a major input have on real output?

The Role and Method of Economics

Scarcity, trade-Offs, and Production Possibilities

Supply and Demand

Bringing Supply and Demand Together

Introduction to the Macroeconomy

Measuring Economic Performance

Economic Growth in the Global Economy

Aggregate Demand

Fiscal Policy

Money and the Banking System

The Bank of Canada

Monetary Policy

International Trade

International Finance

Filters