Question 1

Efficiency wages will:

Accepted Answer

A)  make wages inflexible downward. 
B)  elicit minimum work effort from workers. 
C)  impose a legal price floor on wages. 
D)  increase the number of strikes. 
A)  make wages inflexible downward. 
B)  elicit minimum work effort from workers. 
C)  impose a legal price floor on wages. 
D)  increase the number of strikes.

Question 2

-In the above figure AD1 and AS1 represent the original aggregate supply and demand curves and AD2 and AS2 show the new aggregate demand and supply curves. At the original equilibrium price and quantity, this economy is experiencing:

Accepted Answer

A)  inflation. 
B)  economic growth. 
C)  full employment. 
D)  less than full-capacity output. 
A)  inflation. 
B)  economic growth. 
C)  full employment. 
D)  less than full-capacity output.

Question 3

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

Question 4

-Which of the above diagrams best portrays the effects of a substantial reduction in government spending?

Accepted Answer

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

Question 5

Suppose the full-employment level of real output (Q) for a hypothetical economy is $500 and that the price level (P) initially is 100. Use the following short-run aggregate supply schedules to answer the next question.
  
-Refer to the information above. In the long run, a fall in the price level from 100 to 75 will:

Accepted Answer

A)  decrease real output from $500 to $440. 
B)  increase real output from $500 to $620. 
C)  change the aggregate supply schedule from (a) to (c) and produce an equilibrium level of real output of $500. 
D)  change the aggregate supply schedule from (a) to (b) and produce an equilibrium level of real output of $500. 
A)  decrease real output from $500 to $440. 
B)  increase real output from $500 to $620. 
C)  change the aggregate supply schedule from (a) to (c) and produce an equilibrium level of real output of $500. 
D)  change the aggregate supply schedule from (a) to (b) and produce an equilibrium level of real output of $500.

Question 6

Menu costs will:

Accepted Answer

A)  increase the amount of training of workers. 
B)  result in price wars between businesses. 
C)  increase the legal minimum wage. 
D)  make prices inflexible downward. 
A)  increase the amount of training of workers. 
B)  result in price wars between businesses. 
C)  increase the legal minimum wage. 
D)  make prices inflexible downward.

Question 7

When the excess capacity of business rises, aggregate:

Accepted Answer

A)  demand increases. 
B)  demand decreases. 
C)  supply increases. 
D)  supply decreases. 
A)  demand increases. 
B)  demand decreases. 
C)  supply increases. 
D)  supply decreases.

Question 8

An increase in investment spending caused by a decline in the interest rate will:

Accepted Answer

A)  shift the aggregate supply curve to the left. 
B)  move the economy up along an existing aggregate demand curve. 
C)  shift the aggregate demand curve to the left. 
D)  shift the aggregate demand curve to the right. 
A)  shift the aggregate supply curve to the left. 
B)  move the economy up along an existing aggregate demand curve. 
C)  shift the aggregate demand curve to the left. 
D)  shift the aggregate demand curve to the right.

Question 9

-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 short run, demand-pull inflation could best be shown as:

Accepted Answer

A)  a move from b to c on AS2. 
B)  a move from b to c to d. 
C)  a change of aggregate supply from AS2 to AS3. 
D)  a move from b to d. 
A)  a move from b to c on AS2. 
B)  a move from b to c to d. 
C)  a change of aggregate supply from AS2 to AS3. 
D)  a move from b to d.

Question 10

-Refer to the above diagram. Cost-push inflation can be illustrated by a:

Accepted Answer

A)  shift in the aggregate supply curve from AS1 to AS2. 
B)  shift in the aggregate supply curve from AS1 to AS3. 
C)  shift in the aggregate supply curve from AS2 to AS3. 
D)  movement along the aggregate demand curve from e1 to e3. 
A)  shift in the aggregate supply curve from AS1 to AS2. 
B)  shift in the aggregate supply curve from AS1 to AS3. 
C)  shift in the aggregate supply curve from AS2 to AS3. 
D)  movement along the aggregate demand curve from e1 to e3.

Question 11

Refer to the information below. Investment spending would most likely be influenced by changes in: The following list of factors, are related to the aggregate demand curve.

Accepted Answer

A)  1 and 3. 
B)  4 and 6. 
C)  5 and 10. 
D)  8 and 9. 
A)  1 and 3. 
B)  4 and 6. 
C)  5 and 10. 
D)  8 and 9.

Question 12

The horizontal shape of the immediate short run aggregate supply implies that:

Accepted Answer

A)  the total amount of output in the economy depends only on the general price level. 
B)  the total amount of output in the economy depends only on the volume of spending. 
C)  the total amount of output in the economy is fixed. 
D)  the total amount of spending depends on the price of inputs. 
A)  the total amount of output in the economy depends only on the general price level. 
B)  the total amount of output in the economy depends only on the volume of spending. 
C)  the total amount of output in the economy is fixed. 
D)  the total amount of spending depends on the price of inputs.

Question 13

The equilibrium price level and level of real output occur where:

Accepted Answer

A)  real output is at its highest possible level. 
B)  exports equal imports. 
C)  the price level is at its lowest level. 
D)  the aggregate demand and supply curves intersect. 
A)  real output is at its highest possible level. 
B)  exports equal imports. 
C)  the price level is at its lowest level. 
D)  the aggregate demand and supply curves intersect.

Question 14

The foreign trade effect suggests that an increase in the Canadian price level relative to other countries will:

Accepted Answer

A)  increase the amount of Canadian real output purchased. 
B)  increase Canadian imports and decrease Canadian exports. 
C)  increase both Canadian imports and Canadian exports. 
D)  decrease both Canadian imports and Canadian exports. 
A)  increase the amount of Canadian real output purchased. 
B)  increase Canadian imports and decrease Canadian exports. 
C)  increase both Canadian imports and Canadian exports. 
D)  decrease both Canadian imports and Canadian exports.

Question 15

-Refer to the above diagram. When AD1 shifts to AD2, then at P1Q3 output demanded will:

Accepted Answer

A)  equal output supplied. 
B)  exceed output supplied. 
C)  be less than output supplied. 
D)  be at stable full-employment GDP. 
A)  equal output supplied. 
B)  exceed output supplied. 
C)  be less than output supplied. 
D)  be at stable full-employment GDP.

Question 16

-In the above figure AD1 and AS1 represent the original aggregate supply and demand curves and AD2 and AS2 show the new aggregate demand and supply curves. The change in aggregate supply from AS 1 to AS2 could be caused by:

Accepted Answer

A)  a reduction in the price level. 
B)  the increased availability of entrepreneurial talent. 
C)  an increase in business taxes. 
D)  the real balances, interest-rate, and foreign trade effects. 
A)  a reduction in the price level. 
B)  the increased availability of entrepreneurial talent. 
C)  an increase in business taxes. 
D)  the real balances, interest-rate, and foreign trade effects.

Question 17

The long-run aggregate supply curve is vertical:

Accepted Answer

A)  because the rate of inflation is steady in the long run. 
B)  because resource prices eventually catch up with product prices. 
C)  because product prices always increase at a faster rate than resource prices. 
D)  only when the money supply increases at the same rate as real GDP. 
A)  because the rate of inflation is steady in the long run. 
B)  because resource prices eventually catch up with product prices. 
C)  because product prices always increase at a faster rate than resource prices. 
D)  only when the money supply increases at the same rate as real GDP.

Question 18

Minimum wage laws tend to make the price level more flexible rather than less flexible.

Accepted Answer

A) True 
 B)False

Question 19

The following table shows the aggregate demand and aggregate supply schedule for a hypothetical economy.
  
-Refer to the above table. If the quantity of real domestic output demanded decreased by $500 and the quantity of real domestic output supplied increased by $500 at each price level, the new equilibrium price level and quantity of real domestic output would be:

Accepted Answer

A)  150 and $1500. 
B)  150 and $2000. 
C)  200 and $2000. 
D)  250 and $2000. 
A)  150 and $1500. 
B)  150 and $2000. 
C)  200 and $2000. 
D)  250 and $2000.

Question 20

Which one of the following would not shift the aggregate demand curve?

Accepted Answer

A)  a change in the price level 
B)  depreciation of the international value of the dollar 
C)  a decline in the interest rate at each possible price level 
D)  an increase in personal income tax rates 
A)  a change in the price level 
B)  depreciation of the international value of the dollar 
C)  a decline in the interest rate at each possible price level 
D)  an increase in personal income tax rates

Efficiency wages will:

-In the above figure AD₁ and AS₁ represent the original aggregate supply and demand curves and AD₂ and AS₂ show the new aggregate demand and supply curves. At the original equilibrium price and quantity, this economy is experiencing:

An increase in the price level in the aggregate expenditures model would:

-Which of the above diagrams best portrays the effects of a substantial reduction in government spending?

Menu costs will:

When the excess capacity of business rises, aggregate:

An increase in investment spending caused by a decline in the interest rate 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 short run, demand-pull inflation could best be shown as:

-Refer to the above diagram. Cost-push inflation can be illustrated by a:

Refer to the information below. Investment spending would most likely be influenced by changes in: The following list of factors, are related to the aggregate demand curve.

The horizontal shape of the immediate short run aggregate supply implies that:

The equilibrium price level and level of real output occur where:

The foreign trade effect suggests that an increase in the Canadian price level relative to other countries will:

-Refer to the above diagram. When AD₁ shifts to AD₂, then at P₁Q₃ output demanded will:

-In the above figure AD₁ and AS₁ represent the original aggregate supply and demand curves and AD₂ and AS₂ show the new aggregate demand and supply curves. The change in aggregate supply from AS ₁ to AS₂ could be caused by:

The long-run aggregate supply curve is vertical:

Minimum wage laws tend to make the price level more flexible rather than less flexible.

Which one of the following would not shift the aggregate demand curve?

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

Efficiency wages will:

-In the above figure AD1 and AS1 represent the original aggregate supply and demand curves and AD2 and AS2 show the new aggregate demand and supply curves. At the original equilibrium price and quantity, this economy is experiencing:

An increase in the price level in the aggregate expenditures model would:

-Which of the above diagrams best portrays the effects of a substantial reduction in government spending?

Menu costs will:

When the excess capacity of business rises, aggregate:

An increase in investment spending caused by a decline in the interest rate 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 short run, demand-pull inflation could best be shown as:

-Refer to the above diagram. Cost-push inflation can be illustrated by a:

Refer to the information below. Investment spending would most likely be influenced by changes in: The following list of factors, are related to the aggregate demand curve.

The horizontal shape of the immediate short run aggregate supply implies that:

The equilibrium price level and level of real output occur where:

The foreign trade effect suggests that an increase in the Canadian price level relative to other countries will:

-Refer to the above diagram. When AD1 shifts to AD2, then at P1Q3 output demanded will:

-In the above figure AD1 and AS1 represent the original aggregate supply and demand curves and AD2 and AS2 show the new aggregate demand and supply curves. The change in aggregate supply from AS 1 to AS2 could be caused by:

The long-run aggregate supply curve is vertical:

Minimum wage laws tend to make the price level more flexible rather than less flexible.

Which one of the following would not shift the aggregate demand curve?

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

-In the above figure AD₁ and AS₁ represent the original aggregate supply and demand curves and AD₂ and AS₂ show the new aggregate demand and supply curves. At the original equilibrium price and quantity, this economy is experiencing:

-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 short run, demand-pull inflation could best be shown as:

-Refer to the above diagram. When AD₁ shifts to AD₂, then at P₁Q₃ output demanded will:

-In the above figure AD₁ and AS₁ represent the original aggregate supply and demand curves and AD₂ and AS₂ show the new aggregate demand and supply curves. The change in aggregate supply from AS ₁ to AS₂ could be caused by: