Question 1

Which of the following is true regarding the aggregate demand curve?

Accepted Answer

A) It is vertical at the full-employment level of GDP. 
B) It is horizontal when there is considerable unemployment in the economy. 
C) It is downward-sloping because of the interest-rate,real balances,and foreign-trade effects. 
D) It is downward-sloping because production costs decrease as real output increases. 
E) It is upward-sloping because as output increases,aggregate expenditures increase. 
A) It is vertical at the full-employment level of GDP. 
B) It is horizontal when there is considerable unemployment in the economy. 
C) It is downward-sloping because of the interest-rate,real balances,and foreign-trade effects. 
D) It is downward-sloping because production costs decrease as real output increases. 
E) It is upward-sloping because as output increases,aggregate expenditures increase.

Question 2

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.What are the implications if the price level is 120?

Accepted Answer

A) The price level is above equilibrium. 
B) There is a shortage of real output of 300. 
C) There is a surplus of real output of 300. 
D) There is a surplus of real output of 150. 
A) The price level is above equilibrium. 
B) There is a shortage of real output of 300. 
C) There is a surplus of real output of 300. 
D) There is a surplus of real output of 150.

Question 3

What is the focus of the Keynesian-neoclassical controversy?

Accepted Answer

A) The shape of the AD curve. 
B) The shape of the LAS curve. 
C) The position of the AD curve. 
D) The shape of the AS curve. 
A) The shape of the AD curve. 
B) The shape of the LAS curve. 
C) The position of the AD curve. 
D) The shape of the AS curve.

Question 4

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

Accepted Answer

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

Question 5

According to Keynesians,which of the following statements is correct?

Accepted Answer

A) The AD curve is horizontal but the AS is upward sloping. 
B) The AD curve is vertical but the AS is upward sloping. 
C) The AS is horizontal but the AD is downward sloping. 
D) The AS is vertical but the AD is upward sloping. 
A) The AD curve is horizontal but the AS is upward sloping. 
B) The AD curve is vertical but the AS is upward sloping. 
C) The AS is horizontal but the AD is downward sloping. 
D) The AS is vertical but the AD is upward sloping.

Question 6

-Refer to the figure above to answer this question.If the economy was initially at point a,then 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 a decrease in prices. 
C) The movement could be the result of a decrease in wages. 
D) It is a movement from one full-employment level of Real GDP to another. 
E) The movement could be the result of expansionary monetary policy. 
A) The movement could be the result of an increase in aggregate demand. 
B) The movement could be the result of a decrease in prices. 
C) The movement could be the result of a decrease in wages. 
D) It is a movement from one full-employment level of Real GDP to another. 
E) The movement could be the result of expansionary monetary policy.

Question 7

What is real wage?

Accepted Answer

A) It is equal to nominal wage plus the price level. 
B) It is equal to the nominal wage minus the price level. 
C) It is equal to the nominal wage multiplied by the price level. 
D) It is equal to the nominal wage divided by the price level. 
A) It is equal to nominal wage plus the price level. 
B) It is equal to the nominal wage minus the price level. 
C) It is equal to the nominal wage multiplied by the price level. 
D) It is equal to the nominal wage divided by the price level.

Question 8

The following are aggregate demand and supply schedules for a hypothetical economy.All figures are in $ billions.
   Note: Potential GDP is 3,000.
-Refer to the information above to answer this question.Assume that technological change increases aggregate supply by 340.What will the equilibrium price and quantity be?

Accepted Answer

A) 160 and 3,100. 
B) 160 and 3,440. 
C) 170 and 3,440. 
D) 140 and 2,760. 
E) 140 and 2,820. 
A) 160 and 3,100. 
B) 160 and 3,440. 
C) 170 and 3,440. 
D) 140 and 2,760. 
E) 140 and 2,820.

Question 9

Distinguish the difference between a Keynesian AS curve and Neoclassical AS curve

Accepted Answer

Keynesian economists believed that price

Question 10

Which of the following will likely happen if an economy is experiencing an inflationary gap?

Accepted Answer

A) Consumption will decrease because goods and services are too expensive. 
B) Unemployment will be above the natural rate because Real GDP is less than Potential GDP. 
C) Unemployment will be equal to the natural rate because of high aggregate demand. 
D) Firms will bid up wage rates in an effort to attract and secure scarce labour. 
E) Firms will bid down wage rates in order to create unemployment. 
A) Consumption will decrease because goods and services are too expensive. 
B) Unemployment will be above the natural rate because Real GDP is less than Potential GDP. 
C) Unemployment will be equal to the natural rate because of high aggregate demand. 
D) Firms will bid up wage rates in an effort to attract and secure scarce labour. 
E) Firms will bid down wage rates in order to create unemployment.

Question 11

Which of the following will cause an increase in both aggregate supply and long-run aggregate supply?

Accepted Answer

A) An increase in factor prices. 
B) A decrease in factor prices. 
C) A decrease in the labour participation rate. 
D) An increase in productivity. 
A) An increase in factor prices. 
B) A decrease in factor prices. 
C) A decrease in the labour participation rate. 
D) An increase in productivity.

Question 12

Which of the following is least likely to affect the level of government spending in an economy?

Accepted Answer

A) Social and cultural standards. 
B) People's expectations. 
C) Political philosophy of the government. 
D) Age of consumer durables. 
E) The amount of time left in a government's mandate. 
A) Social and cultural standards. 
B) People's expectations. 
C) Political philosophy of the government. 
D) Age of consumer durables. 
E) The amount of time left in a government's mandate.

Question 13

What are the three reasons for the downward slope of the aggregate demand curve?

Accepted Answer

The aggregate demand curve is downward-s

Question 14

"A change in aggregate supply implies a change in Potential GDP and a change in Potential GDP implies a change in aggregate supply." Evaluate this statement.

Accepted Answer

The first part of the statement is incor

Question 15

What does the term Potential GDP mean?

Accepted Answer

Potential GDP refers to the to

Question 16

What does macroeconomic equilibrium imply?

Accepted Answer

A) The point where Real GDP is at capacity. 
B) The point where the quantity of Real GDP demanded equals the quantity of Real GDP supplied. 
C) It is where the aggregate demand curve intersects the LAS curve. 
D) It is possible only at various price levels. 
E) Full employment GDP. 
A) The point where Real GDP is at capacity. 
B) The point where the quantity of Real GDP demanded equals the quantity of Real GDP supplied. 
C) It is where the aggregate demand curve intersects the LAS curve. 
D) It is possible only at various price levels. 
E) Full employment GDP.

Question 17

Which of the following is true regarding the aggregate demand curve?

Accepted Answer

A) It is upward-sloping because production costs rise as real output increases. 
B) It is downward-sloping because production costs decline as real output increases. 
C) It is upward-sloping because at higher output levels total spending is higher. 
D) It is downward-sloping because a lower price means higher real wealth and therefore people will purchase more. 
E) It is downward-sloping because at lower prices total incomes are higher. 
A) It is upward-sloping because production costs rise as real output increases. 
B) It is downward-sloping because production costs decline as real output increases. 
C) It is upward-sloping because at higher output levels total spending is higher. 
D) It is downward-sloping because a lower price means higher real wealth and therefore people will purchase more. 
E) It is downward-sloping because at lower prices total incomes are higher.

Question 18

If the economy is at full employment and the LAS curve shifts to the right because of,say,an increase in labour force participation rate,then which of the following will result?

Accepted Answer

A) The AS curve will also shift to the right and full employment will be maintained. 
B) The AS curve will also shift to the right but a recessionary gap will result. 
C) The AS curve will shift to the left and full employment will be maintained. 
D) The AS curve will not be affected. 
E) The AS curve may or may not shift depending on what happens to the wage rate. 
A) The AS curve will also shift to the right and full employment will be maintained. 
B) The AS curve will also shift to the right but a recessionary gap will result. 
C) The AS curve will shift to the left and full employment will be maintained. 
D) The AS curve will not be affected. 
E) The AS curve may or may not shift depending on what happens to the wage rate.

Question 19

-Refer to the figure above to answer this question.All of the following,except one,would cause a movement from a to b.Which is the exception?

Accepted Answer

A) An increase in the price level. 
B) An increase in wealth holdings. 
C) An increase in government spending. 
D) A decrease in the interest rate. 
E) An increase in foreign incomes. 
A) An increase in the price level. 
B) An increase in wealth holdings. 
C) An increase in government spending. 
D) A decrease in the interest rate. 
E) An increase in foreign incomes.

Question 20

-Refer to the above graph to answer this question.What are the implications if the price level is currently P1?

Accepted Answer

A) There is a surplus of goods and services and there is a recessionary gap. 
B) There is a shortage of goods and services and there is a recessionary gap. 
C) There is a surplus of goods and services and there is an inflationary gap. 
D) There is a shortage of goods and services and there is an inflationary gap. 
A) There is a surplus of goods and services and there is a recessionary gap. 
B) There is a shortage of goods and services and there is a recessionary gap. 
C) There is a surplus of goods and services and there is an inflationary gap. 
D) There is a shortage of goods and services and there is an inflationary gap.

Which of the following is true regarding the aggregate demand curve?

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.What are the implications if the price level is 120?

What is the focus of the Keynesian-neoclassical controversy?

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

According to Keynesians,which of the following statements is correct?

-Refer to the figure above to answer this question.If the economy was initially at point a,then what would a movement to point b suggest?

What is real wage?

Distinguish the difference between a Keynesian AS curve and Neoclassical AS curve

Which of the following will likely happen if an economy is experiencing an inflationary gap?

Which of the following will cause an increase in both aggregate supply and long-run aggregate supply?

Which of the following is least likely to affect the level of government spending in an economy?

What are the three reasons for the downward slope of the aggregate demand curve?

"A change in aggregate supply implies a change in Potential GDP and a change in Potential GDP implies a change in aggregate supply." Evaluate this statement.

What does the term Potential GDP mean?

What does macroeconomic equilibrium imply?

Which of the following is true regarding the aggregate demand curve?

If the economy is at full employment and the LAS curve shifts to the right because of,say,an increase in labour force participation rate,then which of the following will result?

-Refer to the figure above to answer this question.All of the following,except one,would cause a movement from a to b.Which is the exception?

-Refer to the above graph to answer this question.What are the implications if the price level is currently P1?

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 true regarding the aggregate demand curve?

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.What are the implications if the price level is 120?

What is the focus of the Keynesian-neoclassical controversy?

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

According to Keynesians,which of the following statements is correct?

-Refer to the figure above to answer this question.If the economy was initially at point a,then what would a movement to point b suggest?

What is real wage?

Distinguish the difference between a Keynesian AS curve and Neoclassical AS curve

Which of the following will likely happen if an economy is experiencing an inflationary gap?

Which of the following will cause an increase in both aggregate supply and long-run aggregate supply?

Which of the following is least likely to affect the level of government spending in an economy?

What are the three reasons for the downward slope of the aggregate demand curve?

"A change in aggregate supply implies a change in Potential GDP and a change in Potential GDP implies a change in aggregate supply." Evaluate this statement.

What does the term Potential GDP mean?

What does macroeconomic equilibrium imply?

Which of the following is true regarding the aggregate demand curve?

If the economy is at full employment and the LAS curve shifts to the right because of,say,an increase in labour force participation rate,then which of the following will result?

-Refer to the figure above to answer this question.All of the following,except one,would cause a movement from a to b.Which is the exception?

-Refer to the above graph to answer this question.What are the implications if the price level is currently P1?

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