Question 1

The aggregate demand curve is downward sloping because:

Accepted Answer

A)  an increase in the price level will cause an increase in spending. 
B)  at lower price levels, real wealth decreases, causing a decrease in the quantities of goods and services demanded. 
C)  at lower price levels, interest rates decrease, causing a decrease in the quantities of goods and services demanded. 
D)  at lower price levels, exports increase, causing an increase in the quantities of goods and services demanded. 
A)  an increase in the price level will cause an increase in spending. 
B)  at lower price levels, real wealth decreases, causing a decrease in the quantities of goods and services demanded. 
C)  at lower price levels, interest rates decrease, causing a decrease in the quantities of goods and services demanded. 
D)  at lower price levels, exports increase, causing an increase in the quantities of goods and services demanded.

Question 2

According to classical theory, if the aggregate demand curve decreased and the economy experienced unemployment, then:

Accepted Answer

A)  the economy would remain in this condition indefinitely. 
B)  the government must increase spending to restore full employment. 
C)  prices and wages would fall quickly to restore full employment. 
D)  the supply of money would increase until the economy returned to full employment. 
A)  the economy would remain in this condition indefinitely. 
B)  the government must increase spending to restore full employment. 
C)  prices and wages would fall quickly to restore full employment. 
D)  the supply of money would increase until the economy returned to full employment.

Question 3

Suppose workers become pessimistic about their future employment, which causes them to save more and spend less. If the economy is on the intermediate range of the aggregate supply curve, then:

Accepted Answer

A)  both real GDP and the price level will fall. 
B)  real GDP will fall and the price level will rise. 
C)  real GDP will rise and the price level will fall. 
D)  both real GDP and the price level will rise. 
A)  both real GDP and the price level will fall. 
B)  real GDP will fall and the price level will rise. 
C)  real GDP will rise and the price level will fall. 
D)  both real GDP and the price level will rise.

Question 4

Narrbegin Exhibit 14.2 Aggregate demand and supply   
-In Exhibit 14.2, when aggregate demand shifts from AD4 to AD5, the economy experiences:

Accepted Answer

A)  cost-push inflation. 
B)  cost-pull inflation. 
C)  demand-push inflation. 
D)  demand-pull inflation. 
A)  cost-push inflation. 
B)  cost-pull inflation. 
C)  demand-push inflation. 
D)  demand-pull inflation.

Question 5

Much of the nation's capital stock is idle during a recession and therefore firms have incentives to invest in more.

Accepted Answer

A) True 
 B)False

Question 6

Keynes argued that prices and wages were likely to be inflexible during a recession because:

Accepted Answer

A)  unemployment would be high and firms would have little spare capacity. 
B)  unemployment would be low and firms would have little spare capacity. 
C)  unemployment would be high and firms would have substantial spare capacity. 
D)  unemployment would be low and firms would have substantial spare capacity. 
A)  unemployment would be high and firms would have little spare capacity. 
B)  unemployment would be low and firms would have little spare capacity. 
C)  unemployment would be high and firms would have substantial spare capacity. 
D)  unemployment would be low and firms would have substantial spare capacity.

Question 7

More favourable aggregate supply conditions can cause:

Accepted Answer

A)  a depression. 
B)  a recession. 
C)  real GDP and employment to rise. 
D)  unemployment to rise. 
A)  a depression. 
B)  a recession. 
C)  real GDP and employment to rise. 
D)  unemployment to rise.

Question 8

The interest-rate effect is the impact on:

Accepted Answer

A)  the value of all final goods and services produced during a given time period based on current prices. 
B)  the value of all final goods and services produced during a given time period based on the prices existing in a selected base year. 
C)  the value of all intermediate goods and services sold during a given time period. 
D)  the value of all raw materials extracted during a given time period based on the prices existing in a selected base year. 
A)  the value of all final goods and services produced during a given time period based on current prices. 
B)  the value of all final goods and services produced during a given time period based on the prices existing in a selected base year. 
C)  the value of all intermediate goods and services sold during a given time period. 
D)  the value of all raw materials extracted during a given time period based on the prices existing in a selected base year.

Question 9

Narrbegin Exhibit 14.3 Aggregate supply and demand curves  
-In Exhibit 14.3 which of the following is not consistent with a shift in the aggregate demand curve from AD1 to AD2?

Accepted Answer

A)  A decrease in consumer spending. 
B)  An increase in investment. 
C)  An increase in government spending. 
D)  An increase in net exports. 
A)  A decrease in consumer spending. 
B)  An increase in investment. 
C)  An increase in government spending. 
D)  An increase in net exports.

Question 10

If an economy is operating along the Keynesian section of the aggregate supply curve, then an increase in aggregate demand will result in:

Accepted Answer

A)  an increase in inflation and an increase in real GDP. 
B)  no change in the price level and a decrease in unemployment. 
C)  a decrease in the price level and a decrease in unemployment. 
D)  no change in the price level and an increase in unemployment. 
A)  an increase in inflation and an increase in real GDP. 
B)  no change in the price level and a decrease in unemployment. 
C)  a decrease in the price level and a decrease in unemployment. 
D)  no change in the price level and an increase in unemployment.

Question 11

The effect of an increase in investment on real GDP will be greater, the larger the:

Accepted Answer

A)  MPC. 
B)  APC. 
C)  MPS. 
D)  APS. 
A)  MPC. 
B)  APC. 
C)  MPS. 
D)  APS.

Question 12

The aggregate demand curve shows:

Accepted Answer

A)  that people are willing to buy more goods and services at a lower average price level. 
B)  an increase in average price level. 
C)  that people are willing to buy less goods and services at a lower average price level. 
D)  supply is lagging behind demand. 
A)  that people are willing to buy more goods and services at a lower average price level. 
B)  an increase in average price level. 
C)  that people are willing to buy less goods and services at a lower average price level. 
D)  supply is lagging behind demand.

Question 13

In the aggregate demand-output model, equilibrium occurs if:

Accepted Answer

A)  aggregate demand (A
D)  is greater than GDP. 
B)  aggregate demand (A
D)  is less than GDP. 
C)  there is no unplanned inventory depletion or accumulation. 
D)  consumption equals investment. 
A)  aggregate demand (A
D)  is greater than GDP. 
B)  aggregate demand (A
D)  is less than GDP. 
C)  there is no unplanned inventory depletion or accumulation. 
D)  consumption equals investment.

Question 14

The aggregate supply curve relating the price level to real GDP has three distinguishing segments. Which one of the following indicates the segments?

Accepted Answer

A)  The horizontal segment reflects increasing pressure on the price level as firms bid for resources. The upward-sloping segment reflects the availability of unused resources. The vertical segment reflects the full employment of all resources. 
B)  The horizontal segment reflects the availability of unused resources. The upward-sloping segment reflects the full employment of all resources. The vertical segment reflects increasing pressure on the price level as firms bid for resources. 
C)  The horizontal segment reflects the full employment of all resources. The upward-sloping segment reflects increasing pressure on the price level as firms bid for resources. The vertical segment reflects the availability of unused resources. 
D)  The horizontal segment reflects the availability of unused resources. The upward-sloping segment reflects increasing pressure on the price level as firms bid for resources. The vertical segment reflects the full employment of all resources. 
A)  The horizontal segment reflects increasing pressure on the price level as firms bid for resources. The upward-sloping segment reflects the availability of unused resources. The vertical segment reflects the full employment of all resources. 
B)  The horizontal segment reflects the availability of unused resources. The upward-sloping segment reflects the full employment of all resources. The vertical segment reflects increasing pressure on the price level as firms bid for resources. 
C)  The horizontal segment reflects the full employment of all resources. The upward-sloping segment reflects increasing pressure on the price level as firms bid for resources. The vertical segment reflects the availability of unused resources. 
D)  The horizontal segment reflects the availability of unused resources. The upward-sloping segment reflects increasing pressure on the price level as firms bid for resources. The vertical segment reflects the full employment of all resources.

Question 15

A cut in government spending, a decrease in income abroad, an increase in taxes or an expectation that future consumer income will fall will all cause aggregate:

Accepted Answer

A)  demand to shift outward. 
B)  demand to shift inward. 
C)  supply to shift outward. 
D)  supply to shift inward. 
A)  demand to shift outward. 
B)  demand to shift inward. 
C)  supply to shift outward. 
D)  supply to shift inward.

Question 16

According to the Keynesian model:

Accepted Answer

A)  the equilibrium is found by equating the output produced to aggregate demand. 
B)  the equilibrium is found by equating the inventories to aggregate demand. 
C)  the equilibrium is found by equating the investment to aggregate demand. 
D)  the equilibrium is found by equating the output produced to aggregate supply. 
A)  the equilibrium is found by equating the output produced to aggregate demand. 
B)  the equilibrium is found by equating the inventories to aggregate demand. 
C)  the equilibrium is found by equating the investment to aggregate demand. 
D)  the equilibrium is found by equating the output produced to aggregate supply.

Question 17

If people believe inflation is likely to increase sharply over the next few months, which of the following is likely to occur?

Accepted Answer

A)  Current consumption will fall. 
B)  Current consumption will rise. 
C)  Government spending will increase. 
D)  Interest rates will fall. 
A)  Current consumption will fall. 
B)  Current consumption will rise. 
C)  Government spending will increase. 
D)  Interest rates will fall.

Question 18

Along the horizontal range of the aggregate supply curve, an increase in the aggregate demand curve will increase:

Accepted Answer

A)  both the price level and real GDP. 
B)  only real GDP. 
C)  only the price level. 
D)  real GDP and reduce the price level. 
A)  both the price level and real GDP. 
B)  only real GDP. 
C)  only the price level. 
D)  real GDP and reduce the price level.

Question 19

A share market boom is often accompanied by:

Accepted Answer

A)  an increase in consumption. 
B)  falling real GDP. 
C)  falling investment. 
D)  rising unemployment. 
E)  a decrease in imports. 
A)  an increase in consumption. 
B)  falling real GDP. 
C)  falling investment. 
D)  rising unemployment. 
E)  a decrease in imports.

Question 20

Aggregate supply increases when:

Accepted Answer

A)  wage rates decrease, while the economy's price level remains unchanged. 
B)  resource availability is reduced. 
C)  there are fewer workers. 
D)  there is less capital and the price level remains unchanged. 
A)  wage rates decrease, while the economy's price level remains unchanged. 
B)  resource availability is reduced. 
C)  there are fewer workers. 
D)  there is less capital and the price level remains unchanged.

The aggregate demand curve is downward sloping because:

According to classical theory, if the aggregate demand curve decreased and the economy experienced unemployment, then:

Suppose workers become pessimistic about their future employment, which causes them to save more and spend less. If the economy is on the intermediate range of the aggregate supply curve, then:

Narrbegin Exhibit 14.2 Aggregate demand and supply -In Exhibit 14.2, when aggregate demand shifts from AD₄ to AD₅, the economy experiences:

Much of the nation's capital stock is idle during a recession and therefore firms have incentives to invest in more.

Keynes argued that prices and wages were likely to be inflexible during a recession because:

More favourable aggregate supply conditions can cause:

The interest-rate effect is the impact on:

Narrbegin Exhibit 14.3 Aggregate supply and demand curves -In Exhibit 14.3 which of the following is not consistent with a shift in the aggregate demand curve from AD₁ to AD₂?

If an economy is operating along the Keynesian section of the aggregate supply curve, then an increase in aggregate demand will result in:

The effect of an increase in investment on real GDP will be greater, the larger the:

The aggregate demand curve shows:

In the aggregate demand-output model, equilibrium occurs if:

The aggregate supply curve relating the price level to real GDP has three distinguishing segments. Which one of the following indicates the segments?

A cut in government spending, a decrease in income abroad, an increase in taxes or an expectation that future consumer income will fall will all cause aggregate:

According to the Keynesian model:

If people believe inflation is likely to increase sharply over the next few months, which of the following is likely to occur?

Along the horizontal range of the aggregate supply curve, an increase in the aggregate demand curve will increase:

A share market boom is often accompanied by:

Aggregate supply increases when:

Thinking Like an Economist

Applying Graphs to Economics

Production Possibilities and Opportunity Cost

Market Demand and Supply

Markets in Action

Elasticity of Demand and Supply

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Policy Issues: Housing Affordability and Climate Change

Measuring the Size of the Economy

Business Cycles and Economic Growth

Inflation and Unemployment

The Monetary and Financial System

Macroeconomic Policy I: Monetary Policy

Macroeconomic Policy II: Fiscal Policy

International Trade and Finance

Filters

Exam 15: A Simple Model of the Macro Economy

The aggregate demand curve is downward sloping because:

According to classical theory, if the aggregate demand curve decreased and the economy experienced unemployment, then:

Suppose workers become pessimistic about their future employment, which causes them to save more and spend less. If the economy is on the intermediate range of the aggregate supply curve, then:

Narrbegin Exhibit 14.2 Aggregate demand and supply -In Exhibit 14.2, when aggregate demand shifts from AD4 to AD5, the economy experiences:

Much of the nation's capital stock is idle during a recession and therefore firms have incentives to invest in more.

Keynes argued that prices and wages were likely to be inflexible during a recession because:

More favourable aggregate supply conditions can cause:

The interest-rate effect is the impact on:

Narrbegin Exhibit 14.3 Aggregate supply and demand curves -In Exhibit 14.3 which of the following is not consistent with a shift in the aggregate demand curve from AD1 to AD2?

If an economy is operating along the Keynesian section of the aggregate supply curve, then an increase in aggregate demand will result in:

The effect of an increase in investment on real GDP will be greater, the larger the:

The aggregate demand curve shows:

In the aggregate demand-output model, equilibrium occurs if:

The aggregate supply curve relating the price level to real GDP has three distinguishing segments. Which one of the following indicates the segments?

A cut in government spending, a decrease in income abroad, an increase in taxes or an expectation that future consumer income will fall will all cause aggregate:

According to the Keynesian model:

If people believe inflation is likely to increase sharply over the next few months, which of the following is likely to occur?

Along the horizontal range of the aggregate supply curve, an increase in the aggregate demand curve will increase:

A share market boom is often accompanied by:

Aggregate supply increases when:

Thinking Like an Economist

Applying Graphs to Economics

Production Possibilities and Opportunity Cost

Market Demand and Supply

Markets in Action

Elasticity of Demand and Supply

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Policy Issues: Housing Affordability and Climate Change

Measuring the Size of the Economy

Business Cycles and Economic Growth

Inflation and Unemployment

The Monetary and Financial System

Macroeconomic Policy I: Monetary Policy

Macroeconomic Policy II: Fiscal Policy

International Trade and Finance

Filters

Narrbegin Exhibit 14.2 Aggregate demand and supply -In Exhibit 14.2, when aggregate demand shifts from AD₄ to AD₅, the economy experiences:

Narrbegin Exhibit 14.3 Aggregate supply and demand curves -In Exhibit 14.3 which of the following is not consistent with a shift in the aggregate demand curve from AD₁ to AD₂?