Question 1

Aggregate demand will increase if:

Accepted Answer

A)  the public becomes more optimistic. 
B)  the aggregate price level falls. 
C)  government spending is reduced. 
D)  household wealth decreases. 
A)  the public becomes more optimistic. 
B)  the aggregate price level falls. 
C)  government spending is reduced. 
D)  household wealth decreases.

Question 2

An aggregate output level lower than potential output means there will be:

Accepted Answer

A)  high interest rates. 
B)  high inflation. 
C)  low unemployment. 
D)  high unemployment. 
A)  high interest rates. 
B)  high inflation. 
C)  low unemployment. 
D)  high unemployment.

Question 3

A decrease in energy prices will:

Accepted Answer

A)  increase short-run aggregate supply. 
B)  decrease the quantity of aggregate output supplied in the short run. 
C)  decrease aggregate demand. 
D)  decrease short-run aggregate supply. 
A)  increase short-run aggregate supply. 
B)  decrease the quantity of aggregate output supplied in the short run. 
C)  decrease aggregate demand. 
D)  decrease short-run aggregate supply.

Question 4

A decrease in aggregate demand will generate _____ in real GDP and _____ in the price level in the short run.

Accepted Answer

A)  an increase;no change 
B)  a decrease;no change 
C)  a decrease;a decrease 
D)  no change;an increase 
A)  an increase;no change 
B)  a decrease;no change 
C)  a decrease;a decrease 
D)  no change;an increase

Question 5

Other things equal,in the income-expenditure model,a decrease in the price level will cause the planned aggregate expenditure curve to shift downward,resulting in a lower level of real GDP.

Accepted Answer

A) True 
 B)False

Question 6

An increase in wealth or an increase in government spending will result in a:

Accepted Answer

A)  left-shift of the aggregate supply curve. 
B)  right-shift of the aggregate demand curve. 
C)  right-shift of the aggregate supply curve. 
D)  movement along the aggregate demand curve. 
A)  left-shift of the aggregate supply curve. 
B)  right-shift of the aggregate demand curve. 
C)  right-shift of the aggregate supply curve. 
D)  movement along the aggregate demand curve.

Question 7

Aggregate demand will NOT increase when:

Accepted Answer

A)  household wealth rises but prices are constant. 
B)  government purchases of goods rise. 
C)  the quantity of money increases. 
D)  interest rates increase. 
A)  household wealth rises but prices are constant. 
B)  government purchases of goods rise. 
C)  the quantity of money increases. 
D)  interest rates increase.

Question 8

A negative short-run supply shock _____ aggregate output and _____ the aggregate price level.

Accepted Answer

A)  reduces;increases 
B)  increases;reduces 
C)  reduces;reduces 
D)  increases;increases 
A)  reduces;increases 
B)  increases;reduces 
C)  reduces;reduces 
D)  increases;increases

Question 9

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

Accepted Answer

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

Question 10

Use the following to answer questions:  
-(Figure: Inflationary and Recessionary Gaps)Refer to Figure: Inflationary and Recessionary Gaps.If the economy is in short-run equilibrium at Y1 in panel (a),the economy is in:

Accepted Answer

A)  a recessionary gap. 
B)  an inflationary gap. 
C)  simultaneous short-run and long-run equilibrium. 
D)  full employment. 
A)  a recessionary gap. 
B)  an inflationary gap. 
C)  simultaneous short-run and long-run equilibrium. 
D)  full employment.

Question 11

The aggregate demand curve:

Accepted Answer

A)  slopes downward. 
B)  slopes upward. 
C)  is horizontal at potential output. 
D)  is vertical at potential output. 
A)  slopes downward. 
B)  slopes upward. 
C)  is horizontal at potential output. 
D)  is vertical at potential output.

Question 12

A general increase in wages will result primarily in the _____ curve shifting to the _____.

Accepted Answer

A)  aggregate demand;right 
B)  aggregate demand;left 
C)  short-run aggregate supply;right 
D)  short-run aggregate supply;left 
A)  aggregate demand;right 
B)  aggregate demand;left 
C)  short-run aggregate supply;right 
D)  short-run aggregate supply;left

Question 13

A sudden increase in commodity prices will lead to a shift in the _____ curve to the _____,resulting in _____ aggregate _____.

Accepted Answer

A)  SRAS;right;higher;output 
B)  AD;right;higher;prices 
C)  SRAS;left;lower;output 
D)  AD;left;lower;prices 
A)  SRAS;right;higher;output 
B)  AD;right;higher;prices 
C)  SRAS;left;lower;output 
D)  AD;left;lower;prices

Question 14

Which statement is FALSE?

Accepted Answer

A)  A rise in the price level lowers real wealth and results in a lower level of consumer spending. 
B)  A rise in the price level increases the demand for money,raises the interest rate,and reduces investment spending. 
C)  A fall in the price level will generally lead to a rise in the level of aggregate output demanded. 
D)  A fall in the price level will reduce the demand for money,raise the interest rate,and increase investment spending. 
A)  A rise in the price level lowers real wealth and results in a lower level of consumer spending. 
B)  A rise in the price level increases the demand for money,raises the interest rate,and reduces investment spending. 
C)  A fall in the price level will generally lead to a rise in the level of aggregate output demanded. 
D)  A fall in the price level will reduce the demand for money,raise the interest rate,and increase investment spending.

Question 15

Use the following to answer questions:  
-Using monetary policy to address a recessionary gap caused by a supply shock involves _____ to _____.

Accepted Answer

A)  decreasing the money supply;lower the aggregate price level 
B)  increasing interest rates;decrease investment spending 
C)  decreasing interest rates;lower the aggregate price level 
D)  increasing the money supply;lower the unemployment rate 
A)  decreasing the money supply;lower the aggregate price level 
B)  increasing interest rates;decrease investment spending 
C)  decreasing interest rates;lower the aggregate price level 
D)  increasing the money supply;lower the unemployment rate

Question 16

The short-run aggregate supply curve is positively sloped because:

Accepted Answer

A)  wages and other costs of production respond immediately to changes in prices. 
B)  profit is lower when prices increase,so output decreases. 
C)  workers are willing to work for lower wages rather than be laid off. 
D)  higher prices lead to higher profit and higher output. 
A)  wages and other costs of production respond immediately to changes in prices. 
B)  profit is lower when prices increase,so output decreases. 
C)  workers are willing to work for lower wages rather than be laid off. 
D)  higher prices lead to higher profit and higher output.

Question 17

In the long run,as the economy self-corrects,an increase in aggregate demand will cause the price level to _____ and potential output to _____.

Accepted Answer

A)  rise;increase 
B)  fall;decrease 
C)  rise;remain stable 
D)  fall;remain stable 
A)  rise;increase 
B)  fall;decrease 
C)  rise;remain stable 
D)  fall;remain stable

Question 18

The short-run aggregate supply curve is:

Accepted Answer

A)  downward sloping. 
B)  upward sloping. 
C)  horizontal at the natural level of employment. 
D)  vertical at the natural level of employment. 
A)  downward sloping. 
B)  upward sloping. 
C)  horizontal at the natural level of employment. 
D)  vertical at the natural level of employment.

Question 19

All else being equal,if the aggregate price level falls,the planned expenditure curve will:

Accepted Answer

A)  slope downward. 
B)  shift upward. 
C)  shift downward. 
D)  turn horizontal. 
A)  slope downward. 
B)  shift upward. 
C)  shift downward. 
D)  turn horizontal.

Question 20

In 2011,the Bank of Canada worried about:

Accepted Answer

A)  the threat of stagflation,the simultaneous existence of high inflation and high unemployment. 
B)  hyperinflation,and it used strong disinflationary policies to bring the rise in prices under control. 
C)  a healthy,booming economy,and it used fine-tuning methods to keep the growing economy on track. 
D)  a deep recession with falling prices,and it used stabilization policies to take the economy out of the slump. 
A)  the threat of stagflation,the simultaneous existence of high inflation and high unemployment. 
B)  hyperinflation,and it used strong disinflationary policies to bring the rise in prices under control. 
C)  a healthy,booming economy,and it used fine-tuning methods to keep the growing economy on track. 
D)  a deep recession with falling prices,and it used stabilization policies to take the economy out of the slump.

Aggregate demand will increase if:

An aggregate output level lower than potential output means there will be:

A decrease in energy prices will:

A decrease in aggregate demand will generate _ in real GDP and _ in the price level in the short run.

Other things equal,in the income-expenditure model,a decrease in the price level will cause the planned aggregate expenditure curve to shift downward,resulting in a lower level of real GDP.

An increase in wealth or an increase in government spending will result in a:

Aggregate demand will NOT increase when:

A negative short-run supply shock _ aggregate output and _ the aggregate price level.

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

Use the following to answer questions: -(Figure: Inflationary and Recessionary Gaps)Refer to Figure: Inflationary and Recessionary Gaps.If the economy is in short-run equilibrium at Y₁ in panel (a),the economy is in:

The aggregate demand curve:

A general increase in wages will result primarily in the _ curve shifting to the _.

A sudden increase in commodity prices will lead to a shift in the ___ curve to the _,resulting in _ aggregate ___.

Which statement is FALSE?

Use the following to answer questions: -Using monetary policy to address a recessionary gap caused by a supply shock involves _ to _.

The short-run aggregate supply curve is positively sloped because:

In the long run,as the economy self-corrects,an increase in aggregate demand will cause the price level to _ and potential output to _.

The short-run aggregate supply curve is:

All else being equal,if the aggregate price level falls,the planned expenditure curve will:

In 2011,the Bank of Canada worried about:

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

Aggregate demand will increase if:

An aggregate output level lower than potential output means there will be:

A decrease in energy prices will:

A decrease in aggregate demand will generate _____ in real GDP and _____ in the price level in the short run.

Other things equal,in the income-expenditure model,a decrease in the price level will cause the planned aggregate expenditure curve to shift downward,resulting in a lower level of real GDP.

An increase in wealth or an increase in government spending will result in a:

Aggregate demand will NOT increase when:

A negative short-run supply shock _____ aggregate output and _____ the aggregate price level.

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

Use the following to answer questions: -(Figure: Inflationary and Recessionary Gaps)Refer to Figure: Inflationary and Recessionary Gaps.If the economy is in short-run equilibrium at Y1 in panel (a),the economy is in:

The aggregate demand curve:

A general increase in wages will result primarily in the _____ curve shifting to the _____.

A sudden increase in commodity prices will lead to a shift in the _____ curve to the _____,resulting in _____ aggregate _____.

Which statement is FALSE?

Use the following to answer questions: -Using monetary policy to address a recessionary gap caused by a supply shock involves _____ to _____.

The short-run aggregate supply curve is positively sloped because:

In the long run,as the economy self-corrects,an increase in aggregate demand will cause the price level to _____ and potential output to _____.

The short-run aggregate supply curve is:

All else being equal,if the aggregate price level falls,the planned expenditure curve will:

In 2011,the Bank of Canada worried about:

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

A decrease in aggregate demand will generate _ in real GDP and _ in the price level in the short run.

A negative short-run supply shock _ aggregate output and _ the aggregate price level.

Use the following to answer questions: -(Figure: Inflationary and Recessionary Gaps)Refer to Figure: Inflationary and Recessionary Gaps.If the economy is in short-run equilibrium at Y₁ in panel (a),the economy is in:

A general increase in wages will result primarily in the _ curve shifting to the _.

A sudden increase in commodity prices will lead to a shift in the ___ curve to the _,resulting in _ aggregate ___.

Use the following to answer questions: -Using monetary policy to address a recessionary gap caused by a supply shock involves _ to _.

In the long run,as the economy self-corrects,an increase in aggregate demand will cause the price level to _ and potential output to _.