Question 1

The aggregate demand curve is negatively sloped because of the:

Accepted Answer

A)  substitution effect of an aggregate price level change. 
B)  wealth effect of an aggregate price level change. 
C)  elasticity effect of an aggregate price level change. 
D)  fiscal policy effect. 
A)  substitution effect of an aggregate price level change. 
B)  wealth effect of an aggregate price level change. 
C)  elasticity effect of an aggregate price level change. 
D)  fiscal policy effect.

Question 2

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 (b),to return to potential output at YP policy makers should use:

Accepted Answer

A)  contractionary stabilization policy. 
B)  expansionary stabilization policy. 
C)  policies to shift the SRAS to the left. 
D)  policies to shift the LRAS to the left. 
A)  contractionary stabilization policy. 
B)  expansionary stabilization policy. 
C)  policies to shift the SRAS to the left. 
D)  policies to shift the LRAS to the left.

Question 3

The point at which the long-run aggregate supply curve touches the x-axis is known as:

Accepted Answer

A)  potential output. 
B)  the accelerator point. 
C)  the multiplier point. 
D)  the self-correcting economy point. 
A)  potential output. 
B)  the accelerator point. 
C)  the multiplier point. 
D)  the self-correcting economy point.

Question 4

The short-run aggregate supply curve will shift to the:

Accepted Answer

A)  right if commodity prices increase. 
B)  left if productivity increases. 
C)  left if nominal wages increase. 
D)  right if government spending increases. 
A)  right if commodity prices increase. 
B)  left if productivity increases. 
C)  left if nominal wages increase. 
D)  right if government spending increases.

Question 5

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 point B on AD1 to point E on AD2 could have been the result of:

Accepted Answer

A)  an increase in consumer optimism. 
B)  an increase in consumer pessimism. 
C)  an increase in personal income taxes. 
D)  the central bank reducing the quantity of money. 
A)  an increase in consumer optimism. 
B)  an increase in consumer pessimism. 
C)  an increase in personal income taxes. 
D)  the central bank reducing the quantity of money.

Question 6

Between 1929 and 1933,as aggregate demand decreased,the unemployment rate increased.

Accepted Answer

A) True 
 B)False

Question 7

Use the following to answer question :  
-(Figure: Macroeconomics Equilibrium)Refer to Figure: Macroeconomics Equilibrium.Curve 1 refers to _____,curve 2 refers to _____,and curve 3 refers to _____.

Accepted Answer

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

Question 8

In an inflationary gap:

Accepted Answer

A)  aggregate output is above potential output. 
B)  aggregate output equals potential output. 
C)  aggregate output is less than potential output. 
D)  short-run flexibility will bring the economy back to its potential output without any intervention. 
A)  aggregate output is above potential output. 
B)  aggregate output equals potential output. 
C)  aggregate output is less than potential output. 
D)  short-run flexibility will bring the economy back to its potential output without any intervention.

Question 9

When the price level increases,firms in perfectly competitive markets usually have an increase in profit per unit and increase output.

Accepted Answer

A) True 
 B)False

Question 10

The interest rate effect of a change in the aggregate price level occurs when:

Accepted Answer

A)  a higher price level decreases the purchasing power of money,resulting in an increase in the interest rate. 
B)  the Bank of Canada uses contractionary monetary policy,causing an increase in the interest rate. 
C)  government borrowing in the loanable funds market raises the interest rate. 
D)  the price of a bond increases,reducing the interest rate. 
A)  a higher price level decreases the purchasing power of money,resulting in an increase in the interest rate. 
B)  the Bank of Canada uses contractionary monetary policy,causing an increase in the interest rate. 
C)  government borrowing in the loanable funds market raises the interest rate. 
D)  the price of a bond increases,reducing the interest rate.

Question 11

The aggregate demand curve shows that at higher price levels the quantity of aggregate output demanded will be less than at lower price levels.

Accepted Answer

A) True 
 B)False

Question 12

In the long run,the aggregate price level falls.This could result from:

Accepted Answer

A)  a leftward shift in AD. 
B)  a rightward shift in AD. 
C)  a leftward shift in short-run AS. 
D)  more spending by consumers. 
A)  a leftward shift in AD. 
B)  a rightward shift in AD. 
C)  a leftward shift in short-run AS. 
D)  more spending by consumers.

Question 13

Use the following to answer questions:  
-A(n)_____ will shift the aggregate demand curve.

Accepted Answer

A)  interest rate effect of an aggregate price level change 
B)  wealth effect of an aggregate price level change 
C)  demand expectation 
D)  demand shock 
A)  interest rate effect of an aggregate price level change 
B)  wealth effect of an aggregate price level change 
C)  demand expectation 
D)  demand shock

Question 14

If the Bank of Canada increases the quantity of money in circulation,interest rates _____,investment spending _____,and the aggregate demand curve shifts to the _____.

Accepted Answer

A)  decrease;increases;right 
B)  increase;increases;right 
C)  decrease;increases;left 
D)  increase;decreases;left 
A)  decrease;increases;right 
B)  increase;increases;right 
C)  decrease;increases;left 
D)  increase;decreases;left

Question 15

Suppose the economy is in a short-run equilibrium and actual output is greater than potential output.The economy is in:

Accepted Answer

A)  an inflationary gap;nominal wages will increase and SRAS will shift to the left until actual GDP is equal to potential GDP in the long run. 
B)  a recessionary gap;nominal wages will decrease and AD will shift to the left until actual GDP is equal to potential GDP in the long run. 
C)  an inflationary gap;prices of goods will increase and AD will shift to the right until the economy is in long-run equilibrium. 
D)  a recessionary gap;prices of goods will decrease and LRAS will shift to the left until the economy is in long-run equilibrium. 
A)  an inflationary gap;nominal wages will increase and SRAS will shift to the left until actual GDP is equal to potential GDP in the long run. 
B)  a recessionary gap;nominal wages will decrease and AD will shift to the left until actual GDP is equal to potential GDP in the long run. 
C)  an inflationary gap;prices of goods will increase and AD will shift to the right until the economy is in long-run equilibrium. 
D)  a recessionary gap;prices of goods will decrease and LRAS will shift to the left until the economy is in long-run equilibrium.

Question 16

The higher the existing physical capital stock,the higher is aggregate demand.

Accepted Answer

A) True 
 B)False

Question 17

The three consequences of the decline in demand during the Great Depression were _____ prices,_____ output,and a surge in unemployment.

Accepted Answer

A)  falling;declining 
B)  falling;increasing 
C)  rising;increasing 
D)  rising;declining 
A)  falling;declining 
B)  falling;increasing 
C)  rising;increasing 
D)  rising;declining

Question 18

The economy is self-correcting in the long run.

Accepted Answer

A) True 
 B)False

Question 19

The point where the long-run aggregate supply curve intercepts the horizontal axis is:

Accepted Answer

A)  the point that reflects the economy's actual output. 
B)  the economy's potential output. 
C)  the level of real GDP the economy would produce if all prices were flexible and wages were fixed. 
D)  impossible to attain. 
A)  the point that reflects the economy's actual output. 
B)  the economy's potential output. 
C)  the level of real GDP the economy would produce if all prices were flexible and wages were fixed. 
D)  impossible to attain.

Question 20

In general,a change in the price level,all other things unchanged,causes:

Accepted Answer

A)  a movement along the aggregate demand curve. 
B)  a shift of the aggregate demand curve. 
C)  both a movement along the aggregate demand curve and a shift in the curve. 
D)  no change in the purchasing power of assets. 
A)  a movement along the aggregate demand curve. 
B)  a shift of the aggregate demand curve. 
C)  both a movement along the aggregate demand curve and a shift in the curve. 
D)  no change in the purchasing power of assets.

The aggregate demand curve is negatively sloped because of the:

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 (b),to return to potential output at Y_P policy makers should use:

The point at which the long-run aggregate supply curve touches the x-axis is known as:

The short-run aggregate supply curve will shift to the:

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 point B on AD₁ to point E on AD₂ could have been the result of:

Between 1929 and 1933,as aggregate demand decreased,the unemployment rate increased.

Use the following to answer question : -(Figure: Macroeconomics Equilibrium)Refer to Figure: Macroeconomics Equilibrium.Curve 1 refers to ___,curve 2 refers to _,and curve 3 refers to ___.

In an inflationary gap:

When the price level increases,firms in perfectly competitive markets usually have an increase in profit per unit and increase output.

The interest rate effect of a change in the aggregate price level occurs when:

The aggregate demand curve shows that at higher price levels the quantity of aggregate output demanded will be less than at lower price levels.

In the long run,the aggregate price level falls.This could result from:

Use the following to answer questions: -A(n)_____ will shift the aggregate demand curve.

If the Bank of Canada increases the quantity of money in circulation,interest rates ___,investment spending _,and the aggregate demand curve shifts to the ___.

Suppose the economy is in a short-run equilibrium and actual output is greater than potential output.The economy is in:

The higher the existing physical capital stock,the higher is aggregate demand.

The three consequences of the decline in demand during the Great Depression were _ prices,_ output,and a surge in unemployment.

The economy is self-correcting in the long run.

The point where the long-run aggregate supply curve intercepts the horizontal axis is:

In general,a change in the price level,all other things unchanged,causes:

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

The aggregate demand curve is negatively sloped because of the:

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 (b),to return to potential output at YP policy makers should use:

The point at which the long-run aggregate supply curve touches the x-axis is known as:

The short-run aggregate supply curve will shift to the:

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 point B on AD1 to point E on AD2 could have been the result of:

Between 1929 and 1933,as aggregate demand decreased,the unemployment rate increased.

Use the following to answer question : -(Figure: Macroeconomics Equilibrium)Refer to Figure: Macroeconomics Equilibrium.Curve 1 refers to _____,curve 2 refers to _____,and curve 3 refers to _____.

In an inflationary gap:

When the price level increases,firms in perfectly competitive markets usually have an increase in profit per unit and increase output.

The interest rate effect of a change in the aggregate price level occurs when:

The aggregate demand curve shows that at higher price levels the quantity of aggregate output demanded will be less than at lower price levels.

In the long run,the aggregate price level falls.This could result from:

Use the following to answer questions: -A(n)_____ will shift the aggregate demand curve.

If the Bank of Canada increases the quantity of money in circulation,interest rates _____,investment spending _____,and the aggregate demand curve shifts to the _____.

Suppose the economy is in a short-run equilibrium and actual output is greater than potential output.The economy is in:

The higher the existing physical capital stock,the higher is aggregate demand.

The three consequences of the decline in demand during the Great Depression were _____ prices,_____ output,and a surge in unemployment.

The economy is self-correcting in the long run.

The point where the long-run aggregate supply curve intercepts the horizontal axis is:

In general,a change in the price level,all other things unchanged,causes:

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: Inflationary and Recessionary Gaps)Refer to Figure: Inflationary and Recessionary Gaps.If the economy is in short-run equilibrium at Y₁ in panel (b),to return to potential output at Y_P policy makers should use:

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 point B on AD₁ to point E on AD₂ could have been the result of:

Use the following to answer question : -(Figure: Macroeconomics Equilibrium)Refer to Figure: Macroeconomics Equilibrium.Curve 1 refers to ___,curve 2 refers to _,and curve 3 refers to ___.

If the Bank of Canada increases the quantity of money in circulation,interest rates ___,investment spending _,and the aggregate demand curve shifts to the ___.

The three consequences of the decline in demand during the Great Depression were _ prices,_ output,and a surge in unemployment.