Question 1

-Refer to the graph above to answer this question.What does Figure B illustrate?

Accepted Answer

A) The situation that existed in the 1930s. 
B) Full-employment equilibrium. 
C) An inflationary gap situation. 
D) The situation that existed during World War II. 
E) A situation where individual firms cannot be making profits. 
A) The situation that existed in the 1930s. 
B) Full-employment equilibrium. 
C) An inflationary gap situation. 
D) The situation that existed during World War II. 
E) A situation where individual firms cannot be making profits.

Question 2

Which of the following is true?

Accepted Answer

A) A recessionary gap can be cured in the long run if prices and wages remain stable. 
B) A recessionary gap can be cured in the short run if prices and wages remain stable. 
C) Recessionary gaps can be avoided if the economy grows fast enough. 
D) Keynes believed that recessionary gaps will correct themselves because prices and wages are flexible. 
E) Keynes believed that recessionary gaps will not correct themselves because prices and wages are not flexible. 
A) A recessionary gap can be cured in the long run if prices and wages remain stable. 
B) A recessionary gap can be cured in the short run if prices and wages remain stable. 
C) Recessionary gaps can be avoided if the economy grows fast enough. 
D) Keynes believed that recessionary gaps will correct themselves because prices and wages are flexible. 
E) Keynes believed that recessionary gaps will not correct themselves because prices and wages are not flexible.

Question 3

How will the age of the existing capital stock affect aggregate demand?

Accepted Answer

A) An older capital stock will decrease the level of investment and decrease aggregate demand. 
B) An older capital stock will decrease the level of investment and increase aggregate demand. 
C) An older capital stock will increase the level of investment and increase aggregate demand. 
D) An older capital stock will increase the level of investment and decrease aggregate demand. 
E) The age of the capital stock will not affect the level of investment or aggregate demand. 
A) An older capital stock will decrease the level of investment and decrease aggregate demand. 
B) An older capital stock will decrease the level of investment and increase aggregate demand. 
C) An older capital stock will increase the level of investment and increase aggregate demand. 
D) An older capital stock will increase the level of investment and decrease aggregate demand. 
E) The age of the capital stock will not affect the level of investment or aggregate demand.

Question 4

What is an inflationary gap?

Accepted Answer

A) The difference between nominal and Real GDP. 
B) The difference between actual and potential Real GDP when the economy is below its potential. 
C) The difference between the quantity of goods and services demanded and supplied. 
D) The difference between actual and potential Real GDP when the economy is above full employment. 
A) The difference between nominal and Real GDP. 
B) The difference between actual and potential Real GDP when the economy is below its potential. 
C) The difference between the quantity of goods and services demanded and supplied. 
D) The difference between actual and potential Real GDP when the economy is above full employment.

Question 5

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

Accepted Answer

A) An increase in consumption. 
B) An increase in imports. 
C) An increase in investment. 
D) An increase in government spending. 
A) An increase in consumption. 
B) An increase in imports. 
C) An increase in investment. 
D) An increase in government spending.

Question 6

When does macroeconomic equilibrium occur?

Accepted Answer

A) When exports equal imports. 
B) When the aggregate supply equals the long-run Aggregate Supply. 
C) When the aggregate quantity demanded is equal to the aggregate quantity supplied. 
D) When the aggregate demand equals the long-run Aggregate Supply. 
A) When exports equal imports. 
B) When the aggregate supply equals the long-run Aggregate Supply. 
C) When the aggregate quantity demanded is equal to the aggregate quantity supplied. 
D) When the aggregate demand equals the long-run Aggregate Supply.

Question 7

Assume that the present price level is P1.
  
-Refer to the above graph to answer this question.Which graph illustrates a surplus of goods and services?

Accepted Answer

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

Question 8

Which of the following is true of a rightward shift in the LAS curve?

Accepted Answer

A) The AS will not shift. 
B) The AS will shift right. 
C) It could not be caused by an improvement in technology. 
D) It will raise the level of prices. 
E) It would result if the aggregate demand curve shifted to the right. 
A) The AS will not shift. 
B) The AS will shift right. 
C) It could not be caused by an improvement in technology. 
D) It will raise the level of prices. 
E) It would result if the aggregate demand curve shifted to the right.

Question 9

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

Accepted Answer

A) An decrease in stock prices. 
B) An decrease in interest rates. 
C) A decrease in the price of capital goods. 
D) A decrease in the exchange rate. 
A) An decrease in stock prices. 
B) An decrease in interest rates. 
C) A decrease in the price of capital goods. 
D) A decrease in the exchange rate.

Question 10

What does the term aggregate supply mean?

Accepted Answer

Aggregate supply is the total

Question 11

Why is the aggregate supply curve upward sloping?

Accepted Answer

All else held constant,an incr

Question 12

What factors can cause an increase in aggregate supply?

Accepted Answer

Aggregate supply will increase if there

Question 13

-Refer to the graph above to answer this question.What does Figure A illustrate?

Accepted Answer

A) The situation that Keynes felt existed in the 1930s. 
B) Full-employment equilibrium. 
C) An inflationary gap situation. 
D) A situation of unstable prices. 
E) A situation where individual firms cannot be making profits. 
A) The situation that Keynes felt existed in the 1930s. 
B) Full-employment equilibrium. 
C) An inflationary gap situation. 
D) A situation of unstable prices. 
E) A situation where individual firms cannot be making profits.

Question 14

What does it mean to say that the economy is in a contractionary phase of the business cycle?

Accepted Answer

A) That Real GDP is declining. 
B) That the rate of growth of Real GDP is falling. 
C) That Real GDP is increasing 
D) That the rate of growth of Real GDP is positive. 
E) That inflation is declining. 
A) That Real GDP is declining. 
B) That the rate of growth of Real GDP is falling. 
C) That Real GDP is increasing 
D) That the rate of growth of Real GDP is positive. 
E) That inflation is declining.

Question 15

Since the AS curve is upward sloping,as production increases,all of the following are true except:

Accepted Answer

A) productivity is likely to fall. 
B) the firm will be forced to use less suitable resources. 
C) the price of resources increases 
D) the cost of production to rise. 
A) productivity is likely to fall. 
B) the firm will be forced to use less suitable resources. 
C) the price of resources increases 
D) the cost of production to rise.

Question 16

What are the four components of aggregate demand?

Accepted Answer

A) Consumption,investment,government spending and net exports. 
B) Consumption,investment,productivity and net exports. 
C) Consumption,investment,productivity and human capital. 
D) LAS,AD,AS and the GDP deflator. 
A) Consumption,investment,government spending and net exports. 
B) Consumption,investment,productivity and net exports. 
C) Consumption,investment,productivity and human capital. 
D) LAS,AD,AS and the GDP deflator.

Question 17

Why are the interest-rate,foreign-trade and real balances effects important?

Accepted Answer

A) They help explain the shape of the aggregate supply curve. 
B) They help explain why demand-management policies are ineffective in fighting stagflation. 
C) They help explain shifts in the aggregate supply curve. 
D) They help explain the shape of the aggregate demand curve. 
E) They help explain shifts in the aggregate demand curve. 
A) They help explain the shape of the aggregate supply curve. 
B) They help explain why demand-management policies are ineffective in fighting stagflation. 
C) They help explain shifts in the aggregate supply curve. 
D) They help explain the shape of the aggregate demand curve. 
E) They help explain shifts in the aggregate demand curve.

Question 18

Assume that the present price level is P1.
  
-Refer to the above graph to answer this question.Which graph illustrates an inflationary gap?

Accepted Answer

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

Question 19

The aggregate supply curve is upward-sloping.

Accepted Answer

A) True 
 B)False

Question 20

What would result if the AS curve shifts to the left?

Accepted Answer

A) Equilibrium GDP will fall and prices will rise. 
B) Equilibrium GDP will fall and prices will also fall. 
C) Equilibrium GDP will rise and prices will fall. 
D) Equilibrium GDP will rise and prices will also rise. 
A) Equilibrium GDP will fall and prices will rise. 
B) Equilibrium GDP will fall and prices will also fall. 
C) Equilibrium GDP will rise and prices will fall. 
D) Equilibrium GDP will rise and prices will also rise.

-Refer to the graph above to answer this question.What does Figure B illustrate?

Which of the following is true?

How will the age of the existing capital stock affect aggregate demand?

What is an inflationary gap?

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

When does macroeconomic equilibrium occur?

Assume that the present price level is P1. -Refer to the above graph to answer this question.Which graph illustrates a surplus of goods and services?

Which of the following is true of a rightward shift in the LAS curve?

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

What does the term aggregate supply mean?

Why is the aggregate supply curve upward sloping?

What factors can cause an increase in aggregate supply?

-Refer to the graph above to answer this question.What does Figure A illustrate?

What does it mean to say that the economy is in a contractionary phase of the business cycle?

Since the AS curve is upward sloping,as production increases,all of the following are true except:

What are the four components of aggregate demand?

Why are the interest-rate,foreign-trade and real balances effects important?

Assume that the present price level is P1. -Refer to the above graph to answer this question.Which graph illustrates an inflationary gap?

The aggregate supply curve is upward-sloping.

What would result if the AS curve shifts to the left?

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

-Refer to the graph above to answer this question.What does Figure B illustrate?

Which of the following is true?

How will the age of the existing capital stock affect aggregate demand?

What is an inflationary gap?

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

When does macroeconomic equilibrium occur?

Assume that the present price level is P1. -Refer to the above graph to answer this question.Which graph illustrates a surplus of goods and services?

Which of the following is true of a rightward shift in the LAS curve?

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

What does the term aggregate supply mean?

Why is the aggregate supply curve upward sloping?

What factors can cause an increase in aggregate supply?

-Refer to the graph above to answer this question.What does Figure A illustrate?

What does it mean to say that the economy is in a contractionary phase of the business cycle?

Since the AS curve is upward sloping,as production increases,all of the following are true except:

What are the four components of aggregate demand?

Why are the interest-rate,foreign-trade and real balances effects important?

Assume that the present price level is P1. -Refer to the above graph to answer this question.Which graph illustrates an inflationary gap?

The aggregate supply curve is upward-sloping.

What would result if the AS curve shifts to the left?

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