Question 1

In deriving the aggregate demand curve from the aggregate expenditures model we note that:

Accepted Answer

A)  the wealth or real balances effect is irrelevant to both models. 
B)  a change in the price level will have no impact on the aggregate expenditures schedule. 
C)  an increase (decrease)in the price level shifts the aggregate expenditures schedule upward (downward). 
D)  an increase (decrease)in the price level shifts the aggregate expenditures schedule downward (upward). 
A)  the wealth or real balances effect is irrelevant to both models. 
B)  a change in the price level will have no impact on the aggregate expenditures schedule. 
C)  an increase (decrease)in the price level shifts the aggregate expenditures schedule upward (downward). 
D)  an increase (decrease)in the price level shifts the aggregate expenditures schedule downward (upward). D

Question 2

The determinants of aggregate demand:

Accepted Answer

A)  explain why the aggregate demand curve is downward sloping. 
B)  explain shifts in the aggregate demand curve. 
C)  demonstrate why real output and the price level are inversely related. 
D)  include input prices and resource productivity. 
A)  explain why the aggregate demand curve is downward sloping. 
B)  explain shifts in the aggregate demand curve. 
C)  demonstrate why real output and the price level are inversely related. 
D)  include input prices and resource productivity. B

Question 3

-Refer to the above diagram.If aggregate supply shifts from AS1 to AS2,then the price level will:

Accepted Answer

A)  increase and real domestic output will increase. 
B)  decrease and real domestic output will increase. 
C)  increase and real domestic output will decrease. 
D)  decrease and real domestic output will decrease. 
A)  increase and real domestic output will increase. 
B)  decrease and real domestic output will increase. 
C)  increase and real domestic output will decrease. 
D)  decrease and real domestic output will decrease. C

Question 4

A decrease in the price level in the aggregate expenditures model would:

Accepted Answer

A)  decrease aggregate expenditures and real GDP. 
B)  increase aggregate expenditures and real GDP. 
C)  decrease aggregate expenditures and increase real GDP. 
D)  increase aggregate expenditures and decrease real GDP. 
A)  decrease aggregate expenditures and real GDP. 
B)  increase aggregate expenditures and real GDP. 
C)  decrease aggregate expenditures and increase real GDP. 
D)  increase aggregate expenditures and decrease real GDP.

Question 5

An increase in the GDP price level will:

Accepted Answer

A)  decrease aggregate demand. 
B)  increase the quantity of real domestic output demanded. 
C)  increase aggregate demand. 
D)  decrease the quantity of real domestic output demanded. 
A)  decrease aggregate demand. 
B)  increase the quantity of real domestic output demanded. 
C)  increase aggregate demand. 
D)  decrease the quantity of real domestic output demanded.

Question 6

What is the effect on the multiplier when an increase in aggregate demand also causes the price level to rise?

Accepted Answer

The multiplier effect is weakened with p

Question 7

In terms of aggregate supply,in the immediate short run:

Accepted Answer

A)  the price level is variable. 
B)  real output is fixed. 
C)  nominal wages are variable. 
D)  both input prices and output prices are fixed. 
A)  the price level is variable. 
B)  real output is fixed. 
C)  nominal wages are variable. 
D)  both input prices and output prices are fixed.

Question 8

If personal taxes were decreased and input productivity increased simultaneously,the equilibrium:

Accepted Answer

A)  output would rise. 
B)  output would fall. 
C)  price level would necessarily fall. 
D)  price level would necessarily rise. 
A)  output would rise. 
B)  output would fall. 
C)  price level would necessarily fall. 
D)  price level would necessarily rise.

Question 9

The foreign trade effect suggests that an increase in the Canadian price level relative to other countries will:

Accepted Answer

A)  increase the amount of Canadian real output purchased. 
B)  increase Canadian imports and decrease Canadian exports. 
C)  increase both Canadian imports and Canadian exports. 
D)  decrease both Canadian imports and Canadian exports. 
A)  increase the amount of Canadian real output purchased. 
B)  increase Canadian imports and decrease Canadian exports. 
C)  increase both Canadian imports and Canadian exports. 
D)  decrease both Canadian imports and Canadian exports.

Question 10

The aggregate supply curve slopes downward.

Accepted Answer

A) True 
 B)False

Question 11

An increase in business taxes will shift the aggregate supply curve leftward.

Accepted Answer

A) True 
 B)False

Question 12

Using the aggregate demand-aggregate supply (short-run)model,explain how a reduction in business taxes would affect the economy.

Accepted Answer

A reduction in business taxes affects bo

Question 13

Efficiency wages will:

Accepted Answer

A)  make wages inflexible downward. 
B)  elicit minimum work effort from workers. 
C)  impose a legal price floor on wages. 
D)  increase the number of strikes. 
A)  make wages inflexible downward. 
B)  elicit minimum work effort from workers. 
C)  impose a legal price floor on wages. 
D)  increase the number of strikes.

Question 14

-Refer to the above diagrams.A decline in aggregate expenditures from AE2 to AE1 resulting from the wealth,interest rate,and foreign trade effects would be depicted as:

Accepted Answer

A)  a movement from A to B along aggregate demand curve AD1. 
B)  a movement from B to A along aggregate demand curve AD1. 
C)  a shift of aggregate demand from AD1 to AD2. 
D)  a shift of aggregate demand from AD2 to AD1. 
A)  a movement from A to B along aggregate demand curve AD1. 
B)  a movement from B to A along aggregate demand curve AD1. 
C)  a shift of aggregate demand from AD1 to AD2. 
D)  a shift of aggregate demand from AD2 to AD1.

Question 15

-Refer to the above diagram.Assume that nominal wages initially are set on the basis of the price level P2 and that the economy initially is operating at its full-employment level of output Qf.In the short run,demand-pull inflation could best be shown as:

Accepted Answer

A)  a move from b to c on AS2. 
B)  a move from b to c to d. 
C)  a change of aggregate supply from AS2 to AS3. 
D)  a move from b to d. 
A)  a move from b to c on AS2. 
B)  a move from b to c to d. 
C)  a change of aggregate supply from AS2 to AS3. 
D)  a move from b to d.

Question 16

The aggregate demand curve shows the:

Accepted Answer

A)  inverse relationship between the price level and real GDP purchased. 
B)  direct relationship between the price level and real GDP produced. 
C)  inverse relationship between interest rates and real GDP produced. 
D)  direct relationship between real-balances and real GDP purchased. 
A)  inverse relationship between the price level and real GDP purchased. 
B)  direct relationship between the price level and real GDP produced. 
C)  inverse relationship between interest rates and real GDP produced. 
D)  direct relationship between real-balances and real GDP purchased.

Question 17

Which one of the following would not shift the aggregate demand curve?

Accepted Answer

A)  a change in the price level 
B)  depreciation of the international value of the dollar 
C)  a decline in the interest rate at each possible price level 
D)  an increase in personal income tax rates 
A)  a change in the price level 
B)  depreciation of the international value of the dollar 
C)  a decline in the interest rate at each possible price level 
D)  an increase in personal income tax rates

Question 18

An increase in productivity will shift the aggregate:

Accepted Answer

A)  demand curve leftward. 
B)  demand curve rightward. 
C)  supply curve rightward. 
D)  supply curve leftward. 
A)  demand curve leftward. 
B)  demand curve rightward. 
C)  supply curve rightward. 
D)  supply curve leftward.

Question 19

The economy experiences a decrease in the price level and an increase in real domestic output.Which is a likely explanation?

Accepted Answer

A)  consumer incomes and the quantity of labour have decreased 
B)  interest rates and wage rates have decreased 
C)  the prices of imported resources have increased 
D)  national income abroad has increased 
A)  consumer incomes and the quantity of labour have decreased 
B)  interest rates and wage rates have decreased 
C)  the prices of imported resources have increased 
D)  national income abroad has increased

Question 20

Refer to the diagram below.Which of the following would shift the aggregate demand curve from AD2 to AD1?

Accepted Answer

A)  a decline in personal income tax rates 
B)  an increase in the international value of the dollar 
C)  an increase in government spending 
D)  an upward revision of profit expectations on investment projects 
A)  a decline in personal income tax rates 
B)  an increase in the international value of the dollar 
C)  an increase in government spending 
D)  an upward revision of profit expectations on investment projects

In deriving the aggregate demand curve from the aggregate expenditures model we note that:

The determinants of aggregate demand:

-Refer to the above diagram.If aggregate supply shifts from AS₁ to AS₂,then the price level will:

A decrease in the price level in the aggregate expenditures model would:

An increase in the GDP price level will:

What is the effect on the multiplier when an increase in aggregate demand also causes the price level to rise?

In terms of aggregate supply,in the immediate short run:

If personal taxes were decreased and input productivity increased simultaneously,the equilibrium:

The foreign trade effect suggests that an increase in the Canadian price level relative to other countries will:

The aggregate supply curve slopes downward.

An increase in business taxes will shift the aggregate supply curve leftward.

Using the aggregate demand-aggregate supply (short-run)model,explain how a reduction in business taxes would affect the economy.

Efficiency wages will:

-Refer to the above diagrams.A decline in aggregate expenditures from AE₂ to AE₁ resulting from the wealth,interest rate,and foreign trade effects would be depicted as:

-Refer to the above diagram.Assume that nominal wages initially are set on the basis of the price level P₂ and that the economy initially is operating at its full-employment level of output Q_f.In the short run,demand-pull inflation could best be shown as:

The aggregate demand curve shows the:

Which one of the following would not shift the aggregate demand curve?

An increase in productivity will shift the aggregate:

The economy experiences a decrease in the price level and an increase in real domestic output.Which is a likely explanation?

Refer to the diagram below.Which of the following would shift the aggregate demand curve from AD₂ to AD₁?

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

An Introduction to Macroeconomics

Measuring the Economys Output

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Fiscal Policy, Deficits, Surpluses, and Debt

Money, Banking, and Money Creation

Interest Rates and Monetary Policy

Long-Run Macroeconomic Adjustments

International Trade

Exchange Rates and the Balance of Payments

Filters

Exam 12: Aggregate Demand and Aggregate Supply

In deriving the aggregate demand curve from the aggregate expenditures model we note that:

The determinants of aggregate demand:

-Refer to the above diagram.If aggregate supply shifts from AS1 to AS2,then the price level will:

A decrease in the price level in the aggregate expenditures model would:

An increase in the GDP price level will:

What is the effect on the multiplier when an increase in aggregate demand also causes the price level to rise?

In terms of aggregate supply,in the immediate short run:

If personal taxes were decreased and input productivity increased simultaneously,the equilibrium:

The foreign trade effect suggests that an increase in the Canadian price level relative to other countries will:

The aggregate supply curve slopes downward.

An increase in business taxes will shift the aggregate supply curve leftward.

Using the aggregate demand-aggregate supply (short-run)model,explain how a reduction in business taxes would affect the economy.

Efficiency wages will:

-Refer to the above diagrams.A decline in aggregate expenditures from AE2 to AE1 resulting from the wealth,interest rate,and foreign trade effects would be depicted as:

-Refer to the above diagram.Assume that nominal wages initially are set on the basis of the price level P2 and that the economy initially is operating at its full-employment level of output Qf.In the short run,demand-pull inflation could best be shown as:

The aggregate demand curve shows the:

Which one of the following would not shift the aggregate demand curve?

An increase in productivity will shift the aggregate:

The economy experiences a decrease in the price level and an increase in real domestic output.Which is a likely explanation?

Refer to the diagram below.Which of the following would shift the aggregate demand curve from AD2 to AD1?

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

An Introduction to Macroeconomics

Measuring the Economys Output

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Fiscal Policy, Deficits, Surpluses, and Debt

Money, Banking, and Money Creation

Interest Rates and Monetary Policy

Long-Run Macroeconomic Adjustments

International Trade

Exchange Rates and the Balance of Payments

Filters

-Refer to the above diagram.If aggregate supply shifts from AS₁ to AS₂,then the price level will:

-Refer to the above diagrams.A decline in aggregate expenditures from AE₂ to AE₁ resulting from the wealth,interest rate,and foreign trade effects would be depicted as:

-Refer to the above diagram.Assume that nominal wages initially are set on the basis of the price level P₂ and that the economy initially is operating at its full-employment level of output Q_f.In the short run,demand-pull inflation could best be shown as:

Refer to the diagram below.Which of the following would shift the aggregate demand curve from AD₂ to AD₁?