Question 1

An increase in the aggregate expenditures schedule:

Accepted Answer

A)  increases aggregate demand by the amount of the increase in aggregate expenditures only. 
B)  increases aggregate demand by the amount of the initial increase in aggregate expenditures times the multiplier. 
C)  decreases aggregate demand by the amount of the increase in aggregate expenditures. 
D)  decreases aggregate demand by the amount of the initial increase in aggregate expenditures times the multiplier. 
A)  increases aggregate demand by the amount of the increase in aggregate expenditures only. 
B)  increases aggregate demand by the amount of the initial increase in aggregate expenditures times the multiplier. 
C)  decreases aggregate demand by the amount of the increase in aggregate expenditures. 
D)  decreases aggregate demand by the amount of the initial increase in aggregate expenditures times the multiplier.

Question 2

Which effect best explains the downward slope of the aggregate demand curve?

Accepted Answer

A)  a multiplier effect 
B)  an income effect 
C)  a substitution effect 
D)  an interest rate effect 
A)  a multiplier effect 
B)  an income effect 
C)  a substitution effect 
D)  an interest rate effect

Question 3

The following table shows the aggregate demand and aggregate supply schedule for a hypothetical economy.
  
-Refer to the above table.If the quantity of real domestic output demanded decreased by $500 and the quantity of real domestic output supplied increased by $500 at each price level,the new equilibrium price level and quantity of real domestic output would be:

Accepted Answer

A)  150 and $1500. 
B)  150 and $2000. 
C)  200 and $2000. 
D)  250 and $2000. 
A)  150 and $1500. 
B)  150 and $2000. 
C)  200 and $2000. 
D)  250 and $2000.

Question 4

How can an economy already at full-employment expand without igniting inflation? Explain.

Accepted Answer

If the economy is currently at full-empl

Question 5

The Canadian economy was able to achieve full employment with relative price level stability in the early 2000 because aggregate:

Accepted Answer

A)  demand increased. 
B)  supply decreased. 
C)  demand increased and aggregate supply increased. 
D)  demand decreased and aggregate supply increased. 
A)  demand increased. 
B)  supply decreased. 
C)  demand increased and aggregate supply increased. 
D)  demand decreased and aggregate supply increased.

Question 6

Suppose that real domestic output in an economy is 20 units,the quantity of inputs is 10,and the price of each input is $4.
-Refer to the information above,the level of productivity is:

Accepted Answer

A)  20 
B)  10 
C)  5 
D)  2 
A)  20 
B)  10 
C)  5 
D)  2

Question 7

A n expected rise in the rate of inflation for consumer goods will:

Accepted Answer

A)  decrease aggregate demand. 
B)  increase aggregate supply. 
C)  increase aggregate demand. 
D)  decrease aggregate supply. 
A)  decrease aggregate demand. 
B)  increase aggregate supply. 
C)  increase aggregate demand. 
D)  decrease aggregate supply.

Question 8

An increase in wealth from a substantial increase in stock prices will move the economy along the existing aggregate demand curve.

Accepted Answer

A) True 
 B)False

Question 9

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

Question 10

The long-run aggregate supply curve is vertical:

Accepted Answer

A)  because the rate of inflation is steady in the long run. 
B)  because resource prices eventually catch up with product prices. 
C)  because product prices always increase at a faster rate than resource prices. 
D)  only when the money supply increases at the same rate as real GDP. 
A)  because the rate of inflation is steady in the long run. 
B)  because resource prices eventually catch up with product prices. 
C)  because product prices always increase at a faster rate than resource prices. 
D)  only when the money supply increases at the same rate as real GDP.

Question 11

Refer to the diagram below.Suppose that aggregate demand increased from AD1to AD2.For the price level to stay constant:

Accepted Answer

A)  the aggregate supply curve would have to shift rightward. 
B)  the aggregate supply curve would have to shift leftward. 
C)  real domestic output would have to remain constant. 
D)  the aggregate supply curve would have to be vertical. 
A)  the aggregate supply curve would have to shift rightward. 
B)  the aggregate supply curve would have to shift leftward. 
C)  real domestic output would have to remain constant. 
D)  the aggregate supply curve would have to be vertical.

Question 12

An increase in household borrowing for consumption will:

Accepted Answer

A)  decrease aggregate demand. 
B)  increase aggregate supply. 
C)  increase aggregate demand. 
D)  decrease aggregate supply. 
A)  decrease aggregate demand. 
B)  increase aggregate supply. 
C)  increase aggregate demand. 
D)  decrease aggregate supply.

Question 13

The real-balances effect suggests that a:

Accepted Answer

A)  lower price level will decrease the demand for money,decrease interest rates,and increase consumption and investment spending. 
B)  lower price level will decrease the real value of many financial assets and therefore cause an increase in spending. 
C)  lower price level will increase the real value of many financial assets and therefore cause an increase in spending. 
D)  higher price level will increase the real value of many financial assets and therefore cause an increase in spending. 
A)  lower price level will decrease the demand for money,decrease interest rates,and increase consumption and investment spending. 
B)  lower price level will decrease the real value of many financial assets and therefore cause an increase in spending. 
C)  lower price level will increase the real value of many financial assets and therefore cause an increase in spending. 
D)  higher price level will increase the real value of many financial assets and therefore cause an increase in spending.

Question 14

An increase in investment spending can be expected to shift the:

Accepted Answer

A)  aggregate expenditures curve downward and the aggregate demand curve leftward. 
B)  aggregate expenditures curve upward and the aggregate demand curve leftward. 
C)  aggregate expenditures curve downward and the aggregate demand curve rightward. 
D)  aggregate expenditures curve upward and the aggregate demand curve rightward. 
A)  aggregate expenditures curve downward and the aggregate demand curve leftward. 
B)  aggregate expenditures curve upward and the aggregate demand curve leftward. 
C)  aggregate expenditures curve downward and the aggregate demand curve rightward. 
D)  aggregate expenditures curve upward and the aggregate demand curve rightward.

Question 15

Suppose that real domestic output in an economy is 20 units,the quantity of inputs is 10,and the price of each input is $4.
-The per unit cost of production in the economy described above is:

Accepted Answer

A)  $.50. 
B)  $1 
C)  $2 
D)  $5 
A)  $.50. 
B)  $1 
C)  $2 
D)  $5

Question 16

Explain the three reasons given for the downward slope of the aggregate demand curve.

Accepted Answer

The three reasons given are the real-bal

Question 17

An economy is employing 2 units of capital,5 units of raw materials,and 8 units of labour to produce its total output of 640 units.Each unit of capital costs $10,each unit of raw materials,$4,and each unit of labour,$3.
-Refer to the above information.If the per unit price of raw materials rises from $4 to $8 and all else remains constant,the per unit cost of production will rise by about:

Accepted Answer

A)  100 percent. 
B)  50 percent. 
C)  40 percent. 
D)  30 percent. 
A)  100 percent. 
B)  50 percent. 
C)  40 percent. 
D)  30 percent.

Question 18

An increase in imports (independently of a change in our price level)will increase both aggregate supply and aggregate demand.

Accepted Answer

A) True 
 B)False

Question 19

-Which of the above diagrams best portrays the effects of declines in the prices of imported resources?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Question 20

The following table is for a particular country in which C is consumption expenditures,IS1U1B1gS1U1B0 is gross investment expenditures,G is government expenditures,X is exports,and M is imports.All figures are in billions of dollars.Each question is independent of the other questions.
  
-Refer to the above table.The wealth or real balances effect of changes in the price level is:

Accepted Answer

A)  shown by columns (1)and (2)of the table. 
B)  shown by columns (1)and (5)of the table. 
C)  shown by columns (1)and (4)of the table. 
D)  not shown by the data in the table. 
A)  shown by columns (1)and (2)of the table. 
B)  shown by columns (1)and (5)of the table. 
C)  shown by columns (1)and (4)of the table. 
D)  not shown by the data in the table.

An increase in the aggregate expenditures schedule:

Which effect best explains the downward slope of the aggregate demand curve?

How can an economy already at full-employment expand without igniting inflation? Explain.

The Canadian economy was able to achieve full employment with relative price level stability in the early 2000 because aggregate:

Suppose that real domestic output in an economy is 20 units,the quantity of inputs is 10,and the price of each input is $4. -Refer to the information above,the level of productivity is:

A n expected rise in the rate of inflation for consumer goods will:

An increase in wealth from a substantial increase in stock prices will move the economy along the existing aggregate demand curve.

An increase in the price level in the aggregate expenditures model would:

The long-run aggregate supply curve is vertical:

Refer to the diagram below.Suppose that aggregate demand increased from AD₁to AD₂.For the price level to stay constant:

An increase in household borrowing for consumption will:

The real-balances effect suggests that a:

An increase in investment spending can be expected to shift the:

Suppose that real domestic output in an economy is 20 units,the quantity of inputs is 10,and the price of each input is $4. -The per unit cost of production in the economy described above is:

Explain the three reasons given for the downward slope of the aggregate demand curve.

An increase in imports (independently of a change in our price level)will increase both aggregate supply and aggregate demand.

-Which of the above diagrams best portrays the effects of declines in the prices of imported resources?

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

An increase in the aggregate expenditures schedule:

Which effect best explains the downward slope of the aggregate demand curve?

How can an economy already at full-employment expand without igniting inflation? Explain.

The Canadian economy was able to achieve full employment with relative price level stability in the early 2000 because aggregate:

Suppose that real domestic output in an economy is 20 units,the quantity of inputs is 10,and the price of each input is $4. -Refer to the information above,the level of productivity is:

A n expected rise in the rate of inflation for consumer goods will:

An increase in wealth from a substantial increase in stock prices will move the economy along the existing aggregate demand curve.

An increase in the price level in the aggregate expenditures model would:

The long-run aggregate supply curve is vertical:

Refer to the diagram below.Suppose that aggregate demand increased from AD1to AD2.For the price level to stay constant:

An increase in household borrowing for consumption will:

The real-balances effect suggests that a:

An increase in investment spending can be expected to shift the:

Suppose that real domestic output in an economy is 20 units,the quantity of inputs is 10,and the price of each input is $4. -The per unit cost of production in the economy described above is:

Explain the three reasons given for the downward slope of the aggregate demand curve.

An increase in imports (independently of a change in our price level)will increase both aggregate supply and aggregate demand.

-Which of the above diagrams best portrays the effects of declines in the prices of imported resources?

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 diagram below.Suppose that aggregate demand increased from AD₁to AD₂.For the price level to stay constant: