Question 1

Distinguish between physical capital and human capital.

Accepted Answer

Physical capital is all human-made resou

Question 2

The following table shows the aggregate demand and aggregate supply schedules for the economy of Queen's Island
   a)What are the equilibrium values of price and Real GDP?
b)Suppose Potential GDP is $1,600.What is the output gap for Queen's Island?
c)Assume that aggregate demand shift so such that economy of Queen's Island is at full employment.How and by how much does the aggregate demand change? What are the new equilibrium values of price and Real GDP?
d)Assume that aggregate supply shifts so that economy of Queen's Island is at full employment.How and by how much does the aggregate supply change? What are the new equilibrium values of price and Real GDP?

Accepted Answer

a)Equilibrium price level is 110 and the

Question 3

All of the following,except one,are sources of economic growth.Which is the exception?

Accepted Answer

A) The amount and quality of natural resources available. 
B) The amount of human capital available. 
C) High interest rates. 
D) The amount of capital stock available. 
E) It reflects the amount of resources devoted to research and development. 
A) The amount and quality of natural resources available. 
B) The amount of human capital available. 
C) High interest rates. 
D) The amount of capital stock available. 
E) It reflects the amount of resources devoted to research and development.

Question 4

Which of the following is true regarding Neoclassicists?

Accepted Answer

A) They believed that wages and prices were inflexible downwards. 
B) They believed that recessionary and inflationary gaps were inevitable. 
C) They concentrated their analysis on the AS curve. 
D) They made no distinction between the short run and the long run in reference to aggregate supply. 
A) They believed that wages and prices were inflexible downwards. 
B) They believed that recessionary and inflationary gaps were inevitable. 
C) They concentrated their analysis on the AS curve. 
D) They made no distinction between the short run and the long run in reference to aggregate supply.

Question 5

What are the three determinants of consumption?

Accepted Answer

The three determinants of cons

Question 6

What happens if the aggregate demand curve shifts to the right?

Accepted Answer

A) The price level will rise. 
B) Real GDP will increase. 
C) Both A and B will occur. 
D) Aggregate supply will also rise. 
A) The price level will rise. 
B) Real GDP will increase. 
C) Both A and B will occur. 
D) Aggregate supply will also rise.

Question 7

Assume that the nominal wage rate increases from $16.50 to $18.40 and,at the same time,the price index increases from 110 to 115.By how much has the real wage rate changed?

Accepted Answer

Real wage has increa

Question 8

The foreign-trade effect is the effect that a change in exports and imports has on the price level.

Accepted Answer

A) True 
 B)False

Question 9

Answer the question(s)on the basis of the following table:
  
-Refer to the above information to answer this question.What will happen if there is a decrease in productivity?

Accepted Answer

A) 1 and A 
B) 2 and B 
C) 2 and C 
D) 3 and A 
A) 1 and A 
B) 2 and B 
C) 2 and C 
D) 3 and A

Question 10

The following are an aggregate demand and supply schedules for a hypothetical economy.All figures in $ billions.
  
-Refer to the information above to answer this question.At what level of real output will full employment occur?

Accepted Answer

A) 900. 
B) 950. 
C) 1,000. 
D) 1,100. 
E) It cannot be determined. 
A) 900. 
B) 950. 
C) 1,000. 
D) 1,100. 
E) It cannot be determined.

Question 11

Which of the following statements about the AS curve is true?

Accepted Answer

A) Real wages are constant along an AS curve. 
B) The curve becomes steeper as it approaches Potential GDP. 
C) The AS curve will shift when the price level increases. 
D) It is usually a straight line. 
E) It is a function of aggregate demand. 
A) Real wages are constant along an AS curve. 
B) The curve becomes steeper as it approaches Potential GDP. 
C) The AS curve will shift when the price level increases. 
D) It is usually a straight line. 
E) It is a function of aggregate demand.

Question 12

What does the LAS curve reflect?

Accepted Answer

A) The effect of a change in the price level. 
B) A constant real wage level. 
C) Various levels of employment. 
D) Less than capacity output. 
A) The effect of a change in the price level. 
B) A constant real wage level. 
C) Various levels of employment. 
D) Less than capacity output.

Question 13

An increase in the long-run aggregate supply has no effect on macroeconomic equilibrium.

Accepted Answer

A) True 
 B)False

Question 14

-Refer to the above graph to answer this question.What will happen in the long run if the price level is currently P1?

Accepted Answer

A) The price level will decrease but the nominal wage will increase. 
B) The price level will increase but the nominal wage will decrease. 
C) Both the price level and the nominal wage will decrease. 
D) Both the price level and the nominal wage will increase. 
A) The price level will decrease but the nominal wage will increase. 
B) The price level will increase but the nominal wage will decrease. 
C) Both the price level and the nominal wage will decrease. 
D) Both the price level and the nominal wage will increase.

Question 15

-Refer to the graph above to answer this question.If the economy was initially at point A,what would a movement to point B suggest?

Accepted Answer

A) The movement could be the result of an increase in aggregate demand. 
B) The movement could be the result of an increase in prices. 
C) The movement could be the result of an increase in nominal wages. 
D) The movement could be the result of increased government spending. 
E) The movement could be the result of a decrease in the costs of production. 
A) The movement could be the result of an increase in aggregate demand. 
B) The movement could be the result of an increase in prices. 
C) The movement could be the result of an increase in nominal wages. 
D) The movement could be the result of increased government spending. 
E) The movement could be the result of a decrease in the costs of production.

Question 16

Suppose that the economy of Umbria is initially at full-employment equilibrium.Explain,in terms of shifts in AD or AS,how the following results could occur:
a)Real GDP increases;the price level decreases;the economy is experiencing an inflationary gap.
b)Real GDP increases;the price level increases;the economy is experiencing an inflationary gap.
c)Real GDP increases;the price level decreases;the economy is experiencing a recessionary gap.
d)Real GDP decreases;the price level increases;the economy is experiencing a recessionary gap.
e)Real GDP decreases;the price level increases;the economy is experiencing an inflationary gap.

Accepted Answer

a)Increase in AS
b)Increase in

Question 17

-If at a certain price level the AS exceeds the AD then what are the implications?

Accepted Answer

A) There is a shortage of goods and services,and eventually prices will increase. 
B) There is a surplus of goods and services,and eventually prices will increase. 
C) There is a shortage of goods and services,and eventually prices will decrease. 
D) There is a surplus of goods and services,and eventually prices will decrease. 
A) There is a shortage of goods and services,and eventually prices will increase. 
B) There is a surplus of goods and services,and eventually prices will increase. 
C) There is a shortage of goods and services,and eventually prices will decrease. 
D) There is a surplus of goods and services,and eventually prices will decrease.

Question 18

Why is the AS curve upward-sloping?

Accepted Answer

A) Because firms will produce more if prices are higher,despite no increase in profits. 
B) Because firms will experience higher profits at higher prices and will therefore produce more. 
C) Because aggregate demand rises with higher prices. 
D) Because the LAS curve is also upward sloping. 
A) Because firms will produce more if prices are higher,despite no increase in profits. 
B) Because firms will experience higher profits at higher prices and will therefore produce more. 
C) Because aggregate demand rises with higher prices. 
D) Because the LAS curve is also upward sloping.

Question 19

All of the following,except one,will cause a decrease in aggregate demand.Which is the exception?

Accepted Answer

A) An increase in the money supply. 
B) An increase in taxes. 
C) An increase in the price of capital goods. 
D) An increase in the exchange rate of the Canadian dollar. 
A) An increase in the money supply. 
B) An increase in taxes. 
C) An increase in the price of capital goods. 
D) An increase in the exchange rate of the Canadian dollar.

Question 20

What could cause the level of Real GDP to rise but the price level to fall?

Accepted Answer

A) A rightward shift in the aggregate demand curve. 
B) A leftward shift in the aggregate demand curve. 
C) A rightward shift in the aggregate supply curve. 
D) A leftward shift in the aggregate supply curve. 
A) A rightward shift in the aggregate demand curve. 
B) A leftward shift in the aggregate demand curve. 
C) A rightward shift in the aggregate supply curve. 
D) A leftward shift in the aggregate supply curve.

Distinguish between physical capital and human capital.

All of the following,except one,are sources of economic growth.Which is the exception?

Which of the following is true regarding Neoclassicists?

What are the three determinants of consumption?

What happens if the aggregate demand curve shifts to the right?

Assume that the nominal wage rate increases from $16.50 to $18.40 and,at the same time,the price index increases from 110 to 115.By how much has the real wage rate changed?

The foreign-trade effect is the effect that a change in exports and imports has on the price level.

Answer the question(s)on the basis of the following table: -Refer to the above information to answer this question.What will happen if there is a decrease in productivity?

The following are an aggregate demand and supply schedules for a hypothetical economy.All figures in $ billions. -Refer to the information above to answer this question.At what level of real output will full employment occur?

Which of the following statements about the AS curve is true?

What does the LAS curve reflect?

An increase in the long-run aggregate supply has no effect on macroeconomic equilibrium.

-Refer to the above graph to answer this question.What will happen in the long run if the price level is currently P1?

-Refer to the graph above to answer this question.If the economy was initially at point A,what would a movement to point B suggest?

-If at a certain price level the AS exceeds the AD then what are the implications?

Why is the AS curve upward-sloping?

All of the following,except one,will cause a decrease in aggregate demand.Which is the exception?

What could cause the level of Real GDP to rise but the price level to fall?

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

Distinguish between physical capital and human capital.

All of the following,except one,are sources of economic growth.Which is the exception?

Which of the following is true regarding Neoclassicists?

What are the three determinants of consumption?

What happens if the aggregate demand curve shifts to the right?

Assume that the nominal wage rate increases from $16.50 to $18.40 and,at the same time,the price index increases from 110 to 115.By how much has the real wage rate changed?

The foreign-trade effect is the effect that a change in exports and imports has on the price level.

Answer the question(s)on the basis of the following table: -Refer to the above information to answer this question.What will happen if there is a decrease in productivity?

The following are an aggregate demand and supply schedules for a hypothetical economy.All figures in $ billions. -Refer to the information above to answer this question.At what level of real output will full employment occur?

Which of the following statements about the AS curve is true?

What does the LAS curve reflect?

An increase in the long-run aggregate supply has no effect on macroeconomic equilibrium.

-Refer to the above graph to answer this question.What will happen in the long run if the price level is currently P1?

-Refer to the graph above to answer this question.If the economy was initially at point A,what would a movement to point B suggest?

-If at a certain price level the AS exceeds the AD then what are the implications?

Why is the AS curve upward-sloping?

All of the following,except one,will cause a decrease in aggregate demand.Which is the exception?

What could cause the level of Real GDP to rise but the price level to fall?

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