Question 1

Which of the following is not a determinant of aggregate demand?

Accepted Answer

A) Labour productivity. 
B) Interest rates. 
C) Foreign exchange rates. 
D) The money supply. 
A) Labour productivity. 
B) Interest rates. 
C) Foreign exchange rates. 
D) The money supply. A

Question 2

What is the multiplier?

Accepted Answer

A) It is the effect on income of a change in autonomous spending. 
B) It is the effect on autonomous spending of a change in income. 
C) It is the effect on the level of investment of a change in income. 
D) It is the effect on aggregate demand of a change in income. 
A) It is the effect on income of a change in autonomous spending. 
B) It is the effect on autonomous spending of a change in income. 
C) It is the effect on the level of investment of a change in income. 
D) It is the effect on aggregate demand of a change in income. A

Question 3

Indicate whether each of the following factors will affect aggregate demand (AD)or aggregate supply (AS)and whether the effect would be an increase or a decrease.Then indicate what will happen to the price level and the level of Real GDP and what type of equilibrium will result assuming that the economy is initially in a long-run equilibrium.

Accepted Answer

a)A decrease in the nominal wage rate.
b)A decrease in exports.
c)A decrease in the exchange rate.
d)The discovery of vast new oil field in Northern B.C.
e)An increase in government spending.

Question 4

Assume that the economy is at full employment.Now suppose there is an increase in the size of the labour force.At the new equilibrium,
a)Will there be an output gap? What type?
b)What is the effect on the price level?
c)What is the effect on the level of Real GDP?

Accepted Answer

An increase in the size of the labour fo

Question 5

Demonstrate graphically and explain the case of an inflationary gap.Describe the forces in the economy that will result in the gap closing itself.
The diagram:

Accepted Answer

Initially we are in equilibrium with a p

Question 6

-Refer to the information above to answer this question.Which of the following would be true if the price level was 190?

Accepted Answer

A) There would be a surplus of goods and services of 200. 
B) There would be a shortage of goods and services of 200. 
C) Prices would fall. 
D) Equilibrium exists. 
E) Aggregate supply will rise. 
A) There would be a surplus of goods and services of 200. 
B) There would be a shortage of goods and services of 200. 
C) Prices would fall. 
D) Equilibrium exists. 
E) Aggregate supply will rise.

Question 7

Table 5.2 shows the aggregate demand and supply schedules for the economy of Adana.
  
-Refer to Table 5.2 to answer this question.At what level of real output will full-employment occur in this economy?

Accepted Answer

A) $600. 
B) $650. 
C) $700. 
D) Cannot be determined from the information. 
A) $600. 
B) $650. 
C) $700. 
D) Cannot be determined from the information.

Question 8

Which of the following will cause a decrease in aggregate supply?

Accepted Answer

A) A decrease in tax rates. 
B) An increase in human capital. 
C) An increase in the labour force participation rate. 
D) An increase in factor prices. 
A) A decrease in tax rates. 
B) An increase in human capital. 
C) An increase in the labour force participation rate. 
D) An increase in factor prices.

Question 9

What is the result of a decrease in the AS curve?

Accepted Answer

A) It will decrease the price level and decrease Real GDP. 
B) It will decrease the price level and raise Real GDP. 
C) It will raise the price level and decrease Real GDP. 
D) It will raise the price level and raise Real GDP. 
E) It will decrease the price level and may or may not change Real GDP depending on the shape of the SAS curve. 
A) It will decrease the price level and decrease Real GDP. 
B) It will decrease the price level and raise Real GDP. 
C) It will raise the price level and decrease Real GDP. 
D) It will raise the price level and raise Real GDP. 
E) It will decrease the price level and may or may not change Real GDP depending on the shape of the SAS curve.

Question 10

Which of the following will provide a macroeconomy with prospects for sustained growth in the future?

Accepted Answer

A) Increases in actual GDP. 
B) Increases in long-run aggregate supply. 
C) Increases in aggregate demand. 
D) Unemployment at its natural rate. 
E) Efficient use of all resources. 
A) Increases in actual GDP. 
B) Increases in long-run aggregate supply. 
C) Increases in aggregate demand. 
D) Unemployment at its natural rate. 
E) Efficient use of all resources.

Question 11

An increase in exports will have what effect on aggregate demand?

Accepted Answer

A) It will decrease. 
B) It will increase. 
C) It may increase or decrease depending on the marginal propensity to import. 
D) It will have no effect on aggregate demand. 
A) It will decrease. 
B) It will increase. 
C) It may increase or decrease depending on the marginal propensity to import. 
D) It will have no effect on aggregate demand.

Question 12

What can cause an increase in the LAS?

Accepted Answer

A) An increase in nominal wage rates. 
B) A decrease in taxes. 
C) Technological improvement. 
D) A leftward shift in the AS curve. 
A) An increase in nominal wage rates. 
B) A decrease in taxes. 
C) Technological improvement. 
D) A leftward shift in the AS curve.

Question 13

The following table shows the aggregate demand and aggregate supply schedules for the economy of Saint Andrews
   a)What are the equilibrium values of price and Real GDP?
b)If the price level were 100,would there be a surplus or a shortage? How much? Explain how the economy will revert back to equilibrium.

Accepted Answer

a)The equilibrium price level is 110 and

Question 14

Table 5.2 shows the aggregate demand and supply schedules for the economy of Adana.
  
-Refer to Table 5.2 to answer this question.If the aggregate quantity demanded falls by $100 at every price level,what will be the new equilibrium price level and real output,respectively?

Accepted Answer

A) 100 and $550. 
B) 105 and $650. 
C) 110 and $650. 
D) 115 and $500. 
A) 100 and $550. 
B) 105 and $650. 
C) 110 and $650. 
D) 115 and $500.

Question 15

Assume that the economy is at full employment.For each of the following events determine whether there will be an output gap.If yes,what type?
a)Increase in aggregate demand.
b)Increase in aggregate supply.
c)Increase in long-run aggregate supply.
d)Decrease in long-run aggregate supply.

Accepted Answer

a)Yes,inflationary g

Question 16

Assume that the economy is at full employment.Now suppose a decrease in investment spending.At the new equilibrium,
a)will there be an output gap? What type?
b)what is the effect on the price level?
c)what is the effect on the level of Real GDP?

Accepted Answer

An decrease in investment will

Question 17

The following is a list of economic events:
1.A big cut in the price of imported oil.
2.An increase in the money supply.
3.An increase in labour productivity.
4.A decline in the GDP of the USA
5.A big rise in nominal wages.
-Refer to the information above to answer this question.Which of the listed economic events will cause an increase in both the aggregate supply and in the LAS curve?

Accepted Answer

A) 1 only 
B) 2 only 
C) 3 only 
D) 5 only 
A) 1 only 
B) 2 only 
C) 3 only 
D) 5 only

Question 18

Why is the AS curve upward-sloping?

Accepted Answer

A) Because,since nominal wages increase when production rises,then so too must the price level. 
B) A higher price means higher total profits and therefore firms will produce more. 
C) Higher prices mean higher real wages and therefore firms must produce more to in order to maintain profit levels. 
D) Higher prices increase the demand and therefore the quantity supplied must also increase. 
A) Because,since nominal wages increase when production rises,then so too must the price level. 
B) A higher price means higher total profits and therefore firms will produce more. 
C) Higher prices mean higher real wages and therefore firms must produce more to in order to maintain profit levels. 
D) Higher prices increase the demand and therefore the quantity supplied must also increase.

Question 19

An increase in wage rates will cause an increase in both Real GDP and the price level.

Accepted Answer

A) True 
 B)False

Question 20

Explain the three types of macroeconomic equilibrium.

Accepted Answer

Full employment equilibrium occurs when

Which of the following is not a determinant of aggregate demand?

What is the multiplier?

Assume that the economy is at full employment.Now suppose there is an increase in the size of the labour force.At the new equilibrium, a)Will there be an output gap? What type? b)What is the effect on the price level? c)What is the effect on the level of Real GDP?

Demonstrate graphically and explain the case of an inflationary gap.Describe the forces in the economy that will result in the gap closing itself. The diagram:

-Refer to the information above to answer this question.Which of the following would be true if the price level was 190?

Table 5.2 shows the aggregate demand and supply schedules for the economy of Adana. -Refer to Table 5.2 to answer this question.At what level of real output will full-employment occur in this economy?

Which of the following will cause a decrease in aggregate supply?

What is the result of a decrease in the AS curve?

Which of the following will provide a macroeconomy with prospects for sustained growth in the future?

An increase in exports will have what effect on aggregate demand?

What can cause an increase in the LAS?

Table 5.2 shows the aggregate demand and supply schedules for the economy of Adana. -Refer to Table 5.2 to answer this question.If the aggregate quantity demanded falls by $100 at every price level,what will be the new equilibrium price level and real output,respectively?

Assume that the economy is at full employment.For each of the following events determine whether there will be an output gap.If yes,what type? a)Increase in aggregate demand. b)Increase in aggregate supply. c)Increase in long-run aggregate supply. d)Decrease in long-run aggregate supply.

Assume that the economy is at full employment.Now suppose a decrease in investment spending.At the new equilibrium, a)will there be an output gap? What type? b)what is the effect on the price level? c)what is the effect on the level of Real GDP?

Why is the AS curve upward-sloping?

An increase in wage rates will cause an increase in both Real GDP and the price level.

Explain the three types of macroeconomic equilibrium.

The Economic Problem

Demand and Supply: an Introduction

Measuring the Economy 1: GDP and Economic Growth

Measuring the Economy 2: Unemployment and Inflation

Aggregate Expenditures

Fiscal Policy

Money and Banking

The Money Market and Monetary Policy

International Trade

Exchange Rates and the Balance of Payments

Macroeconomic Policy Revisited

A Walk Through the Twentieth Century and Beyond

Filters

Exam 5: Aggregate Demand and Supply

Which of the following is not a determinant of aggregate demand?

What is the multiplier?

Assume that the economy is at full employment.Now suppose there is an increase in the size of the labour force.At the new equilibrium, a)Will there be an output gap? What type? b)What is the effect on the price level? c)What is the effect on the level of Real GDP?

Demonstrate graphically and explain the case of an inflationary gap.Describe the forces in the economy that will result in the gap closing itself. The diagram:

-Refer to the information above to answer this question.Which of the following would be true if the price level was 190?

Table 5.2 shows the aggregate demand and supply schedules for the economy of Adana. -Refer to Table 5.2 to answer this question.At what level of real output will full-employment occur in this economy?

Which of the following will cause a decrease in aggregate supply?

What is the result of a decrease in the AS curve?

Which of the following will provide a macroeconomy with prospects for sustained growth in the future?

An increase in exports will have what effect on aggregate demand?

What can cause an increase in the LAS?

Table 5.2 shows the aggregate demand and supply schedules for the economy of Adana. -Refer to Table 5.2 to answer this question.If the aggregate quantity demanded falls by $100 at every price level,what will be the new equilibrium price level and real output,respectively?

Assume that the economy is at full employment.For each of the following events determine whether there will be an output gap.If yes,what type? a)Increase in aggregate demand. b)Increase in aggregate supply. c)Increase in long-run aggregate supply. d)Decrease in long-run aggregate supply.

Assume that the economy is at full employment.Now suppose a decrease in investment spending.At the new equilibrium, a)will there be an output gap? What type? b)what is the effect on the price level? c)what is the effect on the level of Real GDP?

Why is the AS curve upward-sloping?

An increase in wage rates will cause an increase in both Real GDP and the price level.

Explain the three types of macroeconomic equilibrium.

The Economic Problem

Demand and Supply: an Introduction

Measuring the Economy 1: GDP and Economic Growth

Measuring the Economy 2: Unemployment and Inflation

Aggregate Expenditures

Fiscal Policy

Money and Banking

The Money Market and Monetary Policy

International Trade

Exchange Rates and the Balance of Payments

Macroeconomic Policy Revisited

A Walk Through the Twentieth Century and Beyond

Filters