Question 1

In terms of aggregate supply, the short run is a period in which:

Accepted Answer

A)  the price level is fixed. 
B)  employment is fixed. 
C)  real output is fixed. 
D)  nominal wages and other input prices are fixed. 
A)  the price level is fixed. 
B)  employment is fixed. 
C)  real output is fixed. 
D)  nominal wages and other input prices are fixed. D

Question 2

Aggregate demand decreases and real output falls but the price level remains the same. Which factor most likely contributes to downward price inflexibility?

Accepted Answer

A)  the multiplier effect 
B)  the wealth effect 
C)  fear of price wars 
D)  business taxes 
A)  the multiplier effect 
B)  the wealth effect 
C)  fear of price wars 
D)  business taxes C

Question 3

We would expect a decline in personal and corporate income taxes to:

Accepted Answer

A)  shift the aggregate demand curve rightward. 
B)  increase consumption and investment spending. 
C)  increase the real output. 
D)  do all of the above. 
A)  shift the aggregate demand curve rightward. 
B)  increase consumption and investment spending. 
C)  increase the real output. 
D)  do all of the above. D

Question 4

The aggregate demand curve:

Accepted Answer

A)  is upward sloping because a higher price level is necessary to make production profitable as production costs rise. 
B)  is downward sloping because production costs decline as real output increases? 
C)  shows the amount of expenditures required to induce the production of each possible level of real output. 
D)  shows the amount of real output which will be purchased at each possible price level. 
A)  is upward sloping because a higher price level is necessary to make production profitable as production costs rise. 
B)  is downward sloping because production costs decline as real output increases? 
C)  shows the amount of expenditures required to induce the production of each possible level of real output. 
D)  shows the amount of real output which will be purchased at each possible price level.

Question 5

Which of the diagrams below best portrays the effects of an increase in consumer spending?

Accepted Answer

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

Question 6

If personal taxes were decreased and input productivity increased simultaneously, the equilibrium:

Accepted Answer

A)  output would rise. 
B)  output would fall. 
C)  price level would necessarily fall. 
D)  price level would necessarily rise. 
A)  output would rise. 
B)  output would fall. 
C)  price level would necessarily fall. 
D)  price level would necessarily rise.

Question 7

The following table is for a particular country in which C is consumption expenditures, IS1U1B1gS1U1B0 is gross investment expenditures, G is government expenditures, X is exports, and M is imports. All figures are in billions of dollars. Each question is independent of the other questions.
  
-Refer to the above table. If the equilibrium level of real GDP is $43 billion in this country, its level of consumption will be:

Accepted Answer

A)  $18 billion. 
B)  $20 billion. 
C)  $22 billion. 
D)  $26 billion. 
A)  $18 billion. 
B)  $20 billion. 
C)  $22 billion. 
D)  $26 billion.

Question 8

The aggregate supply curve slopes downward.

Accepted Answer

A) True 
 B)False

Question 9

-The economy experiences a decrease in the price level and an increase in real domestic output. Which is a likely explanation?

Accepted Answer

A)  consumer incomes and the quantity of labour have decreased 
B)  interest rates and wage rates have decreased 
C)  the prices of imported resources have increased 
D)  national income abroad has increased 
A)  consumer incomes and the quantity of labour have decreased 
B)  interest rates and wage rates have decreased 
C)  the prices of imported resources have increased 
D)  national income abroad has increased

Question 10

Productivity measures:

Accepted Answer

A)  real output per unit of input. 
B)  per unit production costs. 
C)  the changes in real wealth caused by price level changes. 
D)  the amount of capital goods used per worker. 
A)  real output per unit of input. 
B)  per unit production costs. 
C)  the changes in real wealth caused by price level changes. 
D)  the amount of capital goods used per worker.

Question 11

An increase in household borrowing for consumption will:

Accepted Answer

A)  decrease aggregate demand. 
B)  increase aggregate supply. 
C)  increase aggregate demand. 
D)  decrease aggregate supply. 
A)  decrease aggregate demand. 
B)  increase aggregate supply. 
C)  increase aggregate demand. 
D)  decrease aggregate supply.

Question 12

-Refer to the above diagram. Assume that nominal wages initially are set on the basis of the price level P2 and that the economy initially is operating at its full-employment level of output Qf. In the long run, an increase in the price level from P2 to P3 will:

Accepted Answer

A)  increase real output from Qf to Q2. 
B)  change aggregate supply from AS2 to AS1. 
C)  decrease real output from Q2 to Q1. 
D)  not change the level of real output. 
A)  increase real output from Qf to Q2. 
B)  change aggregate supply from AS2 to AS1. 
C)  decrease real output from Q2 to Q1. 
D)  not change the level of real output.

Question 13

When deriving the aggregate demand (AD) curve from the aggregate expenditure model, an increase in Canadian product prices would cause:

Accepted Answer

A)  an increase in the value of household wealth and reduced consumption expenditures. 
B)  an increase in interest rates and lower investment expenditures. 
C)  an increase in exports and imports. 
D)  an increase in Canadian resource prices and an increase in aggregate supply. 
A)  an increase in the value of household wealth and reduced consumption expenditures. 
B)  an increase in interest rates and lower investment expenditures. 
C)  an increase in exports and imports. 
D)  an increase in Canadian resource prices and an increase in aggregate supply.

Question 14

The real-balances effect suggests that a:

Accepted Answer

A)  lower price level will decrease the demand for money, decrease interest rates, and increase consumption and investment spending. 
B)  lower price level will decrease the real value of many financial assets and therefore cause an increase in spending. 
C)  lower price level will increase the real value of many financial assets and therefore cause an increase in spending. 
D)  higher price level will increase the real value of many financial assets and therefore cause an increase in spending. 
A)  lower price level will decrease the demand for money, decrease interest rates, and increase consumption and investment spending. 
B)  lower price level will decrease the real value of many financial assets and therefore cause an increase in spending. 
C)  lower price level will increase the real value of many financial assets and therefore cause an increase in spending. 
D)  higher price level will increase the real value of many financial assets and therefore cause an increase in spending.

Question 15

A change in business taxes and regulation can affect input prices and aggregate supply.

Accepted Answer

A) True 
 B)False

Question 16

A decrease in per unit production costs will shift the aggregate supply curve leftward.

Accepted Answer

A) True 
 B)False

Question 17

The following list of items are related to aggregate demand and/or aggregate supply.
  
-Refer to the above list. A change in which factor is most likely to change both aggregate demand and aggregate supply?

Accepted Answer

A)  3 
B)  5 
C)  7 
D)  9 
A)  3 
B)  5 
C)  7 
D)  9

Question 18

A decrease in the price level in the aggregate expenditures model would:

Accepted Answer

A)  decrease aggregate expenditures and real GDP. 
B)  increase aggregate expenditures and real GDP. 
C)  decrease aggregate expenditures and increase real GDP. 
D)  increase aggregate expenditures and decrease real GDP. 
A)  decrease aggregate expenditures and real GDP. 
B)  increase aggregate expenditures and real GDP. 
C)  decrease aggregate expenditures and increase real GDP. 
D)  increase aggregate expenditures and decrease real GDP.

Question 19

Per unit production cost is:

Accepted Answer

A)  real output divided by inputs. 
B)  total input cost divided by total output. 
C)  units of output divided by total input cost. 
D)  a determinant of aggregate demand. 
A)  real output divided by inputs. 
B)  total input cost divided by total output. 
C)  units of output divided by total input cost. 
D)  a determinant of aggregate demand.

Question 20

The aggregate demand curve is:

Accepted Answer

A)  vertical if full employment exists. 
B)  horizontal when there is considerable unemployment in the economy. 
C)  downward sloping because of the interest-rate, real balances, and foreign trade effects. 
D)  downward sloping because production costs decrease as real output increases. 
A)  vertical if full employment exists. 
B)  horizontal when there is considerable unemployment in the economy. 
C)  downward sloping because of the interest-rate, real balances, and foreign trade effects. 
D)  downward sloping because production costs decrease as real output increases.

In terms of aggregate supply, the short run is a period in which:

Aggregate demand decreases and real output falls but the price level remains the same. Which factor most likely contributes to downward price inflexibility?

We would expect a decline in personal and corporate income taxes to:

The aggregate demand curve:

Which of the diagrams below best portrays the effects of an increase in consumer spending?

If personal taxes were decreased and input productivity increased simultaneously, the equilibrium:

The aggregate supply curve slopes downward.

-The economy experiences a decrease in the price level and an increase in real domestic output. Which is a likely explanation?

Productivity measures:

An increase in household borrowing for consumption will:

-Refer to the above diagram. Assume that nominal wages initially are set on the basis of the price level P₂ and that the economy initially is operating at its full-employment level of output Q_f. In the long run, an increase in the price level from P₂ to P₃ will:

When deriving the aggregate demand (AD) curve from the aggregate expenditure model, an increase in Canadian product prices would cause:

The real-balances effect suggests that a:

A change in business taxes and regulation can affect input prices and aggregate supply.

A decrease in per unit production costs will shift the aggregate supply curve leftward.

The following list of items are related to aggregate demand and/or aggregate supply. -Refer to the above list. A change in which factor is most likely to change both aggregate demand and aggregate supply?

A decrease in the price level in the aggregate expenditures model would:

Per unit production cost is:

The aggregate demand curve is:

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Introduction to Macroeconomics

Measuring the Economys Output

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Fiscal Policy, Deficits, Surpluses, and Debt

Money, Banking, and Money Creation

Interest Rates and Monetary Policy

Financial Economics

Long-Run Macroeconomic Adjustments

International Trade

Exchange Rates and the Balance of Payments

Filters

Exam 10: Aggregate Demand and Aggregate Supply

In terms of aggregate supply, the short run is a period in which:

Aggregate demand decreases and real output falls but the price level remains the same. Which factor most likely contributes to downward price inflexibility?

We would expect a decline in personal and corporate income taxes to:

The aggregate demand curve:

Which of the diagrams below best portrays the effects of an increase in consumer spending?

If personal taxes were decreased and input productivity increased simultaneously, the equilibrium:

The aggregate supply curve slopes downward.

-The economy experiences a decrease in the price level and an increase in real domestic output. Which is a likely explanation?

Productivity measures:

An increase in household borrowing for consumption will:

-Refer to the above diagram. Assume that nominal wages initially are set on the basis of the price level P2 and that the economy initially is operating at its full-employment level of output Qf. In the long run, an increase in the price level from P2 to P3 will:

When deriving the aggregate demand (AD) curve from the aggregate expenditure model, an increase in Canadian product prices would cause:

The real-balances effect suggests that a:

A change in business taxes and regulation can affect input prices and aggregate supply.

A decrease in per unit production costs will shift the aggregate supply curve leftward.

The following list of items are related to aggregate demand and/or aggregate supply. -Refer to the above list. A change in which factor is most likely to change both aggregate demand and aggregate supply?

A decrease in the price level in the aggregate expenditures model would:

Per unit production cost is:

The aggregate demand curve is:

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Introduction to Macroeconomics

Measuring the Economys Output

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Fiscal Policy, Deficits, Surpluses, and Debt

Money, Banking, and Money Creation

Interest Rates and Monetary Policy

Financial Economics

Long-Run Macroeconomic Adjustments

International Trade

Exchange Rates and the Balance of Payments

Filters

-Refer to the above diagram. Assume that nominal wages initially are set on the basis of the price level P₂ and that the economy initially is operating at its full-employment level of output Q_f. In the long run, an increase in the price level from P₂ to P₃ will: