Question 1

An economy operating at a real GDP level below its potential will have:

Accepted Answer

A)  relatively high unemployment levels. 
B)  nominal wages moving upward as the economy moves from the short run to the long run. 
C)  the SRAS curve shifting left as the economy corrects itself from the short run to the long run. 
D)  no change in price levels. 
A)  relatively high unemployment levels. 
B)  nominal wages moving upward as the economy moves from the short run to the long run. 
C)  the SRAS curve shifting left as the economy corrects itself from the short run to the long run. 
D)  no change in price levels.

Question 2

Use the following to answer questions:  
-(Figure: An Increase in Aggregate Demand)Refer to Figure: An Increase in Aggregate Demand.Because of the pressures at the short-run equilibrium at Y2 and P2:

Accepted Answer

A)  the SRAS will shift to the right. 
B)  the SRAS curve will shift to the left. 
C)  unemployment will decrease. 
D)  LRAS will shift to the right. 
A)  the SRAS will shift to the right. 
B)  the SRAS curve will shift to the left. 
C)  unemployment will decrease. 
D)  LRAS will shift to the right.

Question 3

An increase in the minimum wage would likely cause an increase in short-run aggregate supply.

Accepted Answer

A) True 
 B)False

Question 4

Use the following to answer questions:  
-(Figure: Inflationary and Recessionary Gaps)Refer to Figure: Inflationary and Recessionary Gaps.The intersection of AD with SRAS in panel (b)indicates:

Accepted Answer

A)  a short-run equilibrium. 
B)  a long-run equilibrium. 
C)  that unemployment is too high. 
D)  stagflation. 
A)  a short-run equilibrium. 
B)  a long-run equilibrium. 
C)  that unemployment is too high. 
D)  stagflation.

Question 5

The aggregate demand curve shows a negative relationship between the price level and the quantity of aggregate output demanded.

Accepted Answer

A) True 
 B)False

Question 6

In the short run,when there is an increase in aggregate demand,the aggregate price level will _____ and the aggregate output level will _____.

Accepted Answer

A)  rise;fall 
B)  rise;rise 
C)  fall;rise 
D)  fall;fall 
A)  rise;fall 
B)  rise;rise 
C)  fall;rise 
D)  fall;fall

Question 7

According to the aggregate demand curve,when the aggregate price level _____,the quantity of aggregate output _____.

Accepted Answer

A)  rises;supplied falls 
B)  falls;demanded falls 
C)  rises;demanded falls 
D)  rises;demanded does not change 
A)  rises;supplied falls 
B)  falls;demanded falls 
C)  rises;demanded falls 
D)  rises;demanded does not change

Question 8

A negative demand shock can cause:

Accepted Answer

A)  a liquidity trap. 
B)  crowding out. 
C)  a recessionary gap. 
D)  an inflationary gap. 
A)  a liquidity trap. 
B)  crowding out. 
C)  a recessionary gap. 
D)  an inflationary gap.

Question 9

If the price level falls by 10%,the purchasing power of $10 000 will:

Accepted Answer

A)  increase to $11 000. 
B)  decrease to $9 000. 
C)  decrease to $1 000. 
D)  remain constant. 
A)  increase to $11 000. 
B)  decrease to $9 000. 
C)  decrease to $1 000. 
D)  remain constant.

Question 10

Use the following to answer questions:  
-(Figure: Shift of the Aggregate Demand Curve)Refer to Figure: Shift of the Aggregate Demand Curve.A movement from AD1 to AD2 may have been the result of:

Accepted Answer

A)  an increase in government spending. 
B)  a decrease in government spending. 
C)  increases in personal income taxes. 
D)  a decrease in consumer wealth. 
A)  an increase in government spending. 
B)  a decrease in government spending. 
C)  increases in personal income taxes. 
D)  a decrease in consumer wealth.

Question 11

Use the following to answer questions:  
-(Figure: Shifts of the AD-AS Curves)Refer to Figure: Shifts of the AD-AS Curves.A short run increase in net exports is illustrated by panel:

Accepted Answer

A)  (a). 
B)  (b). 
C)  (c). 
D)  (d). 
A)  (a). 
B)  (b). 
C)  (c). 
D)  (d).

Question 12

When unemployment is high,in the short run,nominal wages will:

Accepted Answer

A)  be flexible. 
B)  be inflexible. 
C)  not be affected. 
D)  be contracted at the minimum wage. 
A)  be flexible. 
B)  be inflexible. 
C)  not be affected. 
D)  be contracted at the minimum wage.

Question 13

Graphically,a recessionary gap is measured as the:

Accepted Answer

A)  difference between the actual price level and the equilibrium price level. 
B)  difference between actual GDP and potential output. 
C)  vertical distance between aggregate demand and aggregate supply at actual real GDP. 
D)  vertical distance between aggregate demand and aggregate supply at potential output. 
A)  difference between the actual price level and the equilibrium price level. 
B)  difference between actual GDP and potential output. 
C)  vertical distance between aggregate demand and aggregate supply at actual real GDP. 
D)  vertical distance between aggregate demand and aggregate supply at potential output.

Question 14

Use the following to answer questions:  
-When the economy is producing output above the potential,it has:

Accepted Answer

A)  a Keynesian gap. 
B)  falling wages. 
C)  a recessionary gap. 
D)  an inflationary gap. 
A)  a Keynesian gap. 
B)  falling wages. 
C)  a recessionary gap. 
D)  an inflationary gap.

Question 15

Use the following to answer questions:  
-(Figure: Inflationary and Recessionary Gaps)Refer to Figure: Inflationary and Recessionary Gaps.YP in panel (b):

Accepted Answer

A)  is potential output. 
B)  indicates a decrease in aggregate demand. 
C)  indicates a recessionary gap. 
D)  is associated with considerable unemployment. 
A)  is potential output. 
B)  indicates a decrease in aggregate demand. 
C)  indicates a recessionary gap. 
D)  is associated with considerable unemployment.

Question 16

Deflation was a problem in both the Great Depression and the recession of 1979-1982.

Accepted Answer

A) True 
 B)False

Question 17

Use the following to answer questions:  
-(Figure: Inflationary and Recessionary Gaps)Refer to Figure: Inflationary and Recessionary Gaps.In panel (a),an expansionary policy designed to move the economy from Y1 to YP would attempt to shift the:

Accepted Answer

A)  aggregate demand curve to the left by increasing aggregate demand. 
B)  aggregate demand curve to the right by increasing aggregate demand. 
C)  SRAS curve to the left. 
D)  LRAS curve to the left. 
A)  aggregate demand curve to the left by increasing aggregate demand. 
B)  aggregate demand curve to the right by increasing aggregate demand. 
C)  SRAS curve to the left. 
D)  LRAS curve to the left.

Question 18

Suppose that the Canadian government doubles its spending on health care.The _____ curve shifts _____,output _____,and prices _____.

Accepted Answer

A)  short-run aggregate supply;right;increases;decrease 
B)  short-run aggregate supply;left;decreases;increase 
C)  aggregate demand;left;decreases;decrease 
D)  aggregate demand;right;increases;increase 
A)  short-run aggregate supply;right;increases;decrease 
B)  short-run aggregate supply;left;decreases;increase 
C)  aggregate demand;left;decreases;decrease 
D)  aggregate demand;right;increases;increase

Question 19

An increase in government spending,all other things unchanged,will cause the aggregate demand curve to:

Accepted Answer

A)  become positively sloped. 
B)  remain constant. 
C)  shift to the right. 
D)  shift to the left. 
A)  become positively sloped. 
B)  remain constant. 
C)  shift to the right. 
D)  shift to the left.

Question 20

The economic slump in the 1970s looked different from the slump at the beginning of the Great Depression because it was:

Accepted Answer

A)  the result of a lack of confidence that led businesses and consumers to spend less. 
B)  largely caused by events in the Middle East that led to sudden cuts in world oil production and soaring prices for oil. 
C)  the direct result of a contractionary monetary policy. 
D)  the result solely of a negative demand shock. 
A)  the result of a lack of confidence that led businesses and consumers to spend less. 
B)  largely caused by events in the Middle East that led to sudden cuts in world oil production and soaring prices for oil. 
C)  the direct result of a contractionary monetary policy. 
D)  the result solely of a negative demand shock.

An economy operating at a real GDP level below its potential will have:

Use the following to answer questions: -(Figure: An Increase in Aggregate Demand)Refer to Figure: An Increase in Aggregate Demand.Because of the pressures at the short-run equilibrium at Y₂ and P₂:

An increase in the minimum wage would likely cause an increase in short-run aggregate supply.

Use the following to answer questions: -(Figure: Inflationary and Recessionary Gaps)Refer to Figure: Inflationary and Recessionary Gaps.The intersection of AD with SRAS in panel (b)indicates:

The aggregate demand curve shows a negative relationship between the price level and the quantity of aggregate output demanded.

In the short run,when there is an increase in aggregate demand,the aggregate price level will _ and the aggregate output level will _.

According to the aggregate demand curve,when the aggregate price level _,the quantity of aggregate output _.

A negative demand shock can cause:

If the price level falls by 10%,the purchasing power of $10 000 will:

Use the following to answer questions: -(Figure: Shift of the Aggregate Demand Curve)Refer to Figure: Shift of the Aggregate Demand Curve.A movement from AD₁ to AD₂ may have been the result of:

Use the following to answer questions: -(Figure: Shifts of the AD-AS Curves)Refer to Figure: Shifts of the AD-AS Curves.A short run increase in net exports is illustrated by panel:

When unemployment is high,in the short run,nominal wages will:

Graphically,a recessionary gap is measured as the:

Use the following to answer questions: -When the economy is producing output above the potential,it has:

Use the following to answer questions: -(Figure: Inflationary and Recessionary Gaps)Refer to Figure: Inflationary and Recessionary Gaps.Y_P in panel (b):

Deflation was a problem in both the Great Depression and the recession of 1979-1982.

Use the following to answer questions: -(Figure: Inflationary and Recessionary Gaps)Refer to Figure: Inflationary and Recessionary Gaps.In panel (a),an expansionary policy designed to move the economy from Y₁ to Y_P would attempt to shift the:

Suppose that the Canadian government doubles its spending on health care.The ___ curve shifts _,output _,and prices ___.

An increase in government spending,all other things unchanged,will cause the aggregate demand curve to:

The economic slump in the 1970s looked different from the slump at the beginning of the Great Depression because it was:

First Principles

Economic Models: Trade-Offs and Trade

Supply and Demand

Price Controls and Quotas: Meddling With Markets

International Trade

Macroeconomics: the Big Picture

Gdp and the Cpi: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Savings, Investment Spending, and the Financial System

Income and Expenditure

Fiscal Policy

Money, Banking, and the Federal Reserve System

Monetary Policy

Inflation, Disinflation, and Deflation

Macroeconomics: Events and Ideas

International Macroeconomics

Graphs in Economics

Filters

Exam 12: Aggregate Demand and Aggregate Supply

An economy operating at a real GDP level below its potential will have:

Use the following to answer questions: -(Figure: An Increase in Aggregate Demand)Refer to Figure: An Increase in Aggregate Demand.Because of the pressures at the short-run equilibrium at Y2 and P2:

An increase in the minimum wage would likely cause an increase in short-run aggregate supply.

Use the following to answer questions: -(Figure: Inflationary and Recessionary Gaps)Refer to Figure: Inflationary and Recessionary Gaps.The intersection of AD with SRAS in panel (b)indicates:

The aggregate demand curve shows a negative relationship between the price level and the quantity of aggregate output demanded.

In the short run,when there is an increase in aggregate demand,the aggregate price level will _____ and the aggregate output level will _____.

According to the aggregate demand curve,when the aggregate price level _____,the quantity of aggregate output _____.

A negative demand shock can cause:

If the price level falls by 10%,the purchasing power of $10 000 will:

Use the following to answer questions: -(Figure: Shift of the Aggregate Demand Curve)Refer to Figure: Shift of the Aggregate Demand Curve.A movement from AD1 to AD2 may have been the result of:

Use the following to answer questions: -(Figure: Shifts of the AD-AS Curves)Refer to Figure: Shifts of the AD-AS Curves.A short run increase in net exports is illustrated by panel:

When unemployment is high,in the short run,nominal wages will:

Graphically,a recessionary gap is measured as the:

Use the following to answer questions: -When the economy is producing output above the potential,it has:

Use the following to answer questions: -(Figure: Inflationary and Recessionary Gaps)Refer to Figure: Inflationary and Recessionary Gaps.YP in panel (b):

Deflation was a problem in both the Great Depression and the recession of 1979-1982.

Use the following to answer questions: -(Figure: Inflationary and Recessionary Gaps)Refer to Figure: Inflationary and Recessionary Gaps.In panel (a),an expansionary policy designed to move the economy from Y1 to YP would attempt to shift the:

Suppose that the Canadian government doubles its spending on health care.The _____ curve shifts _____,output _____,and prices _____.

An increase in government spending,all other things unchanged,will cause the aggregate demand curve to:

The economic slump in the 1970s looked different from the slump at the beginning of the Great Depression because it was:

First Principles

Economic Models: Trade-Offs and Trade

Supply and Demand

Price Controls and Quotas: Meddling With Markets

International Trade

Macroeconomics: the Big Picture

Gdp and the Cpi: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Savings, Investment Spending, and the Financial System

Income and Expenditure

Fiscal Policy

Money, Banking, and the Federal Reserve System

Monetary Policy

Inflation, Disinflation, and Deflation

Macroeconomics: Events and Ideas

International Macroeconomics

Graphs in Economics

Filters

Use the following to answer questions: -(Figure: An Increase in Aggregate Demand)Refer to Figure: An Increase in Aggregate Demand.Because of the pressures at the short-run equilibrium at Y₂ and P₂:

In the short run,when there is an increase in aggregate demand,the aggregate price level will _ and the aggregate output level will _.

According to the aggregate demand curve,when the aggregate price level _,the quantity of aggregate output _.

Use the following to answer questions: -(Figure: Shift of the Aggregate Demand Curve)Refer to Figure: Shift of the Aggregate Demand Curve.A movement from AD₁ to AD₂ may have been the result of:

Use the following to answer questions: -(Figure: Inflationary and Recessionary Gaps)Refer to Figure: Inflationary and Recessionary Gaps.Y_P in panel (b):

Use the following to answer questions: -(Figure: Inflationary and Recessionary Gaps)Refer to Figure: Inflationary and Recessionary Gaps.In panel (a),an expansionary policy designed to move the economy from Y₁ to Y_P would attempt to shift the:

Suppose that the Canadian government doubles its spending on health care.The ___ curve shifts _,output _,and prices ___.