Question 1

An increase in taxes will cause a(n):

Accepted Answer

A)  decrease in the quantity of real domestic output demanded. 
B)  increase in the quantity of real domestic output demanded. 
C)  decrease in aggregate demand. 
D)  increase in aggregate demand. 
A)  decrease in the quantity of real domestic output demanded. 
B)  increase in the quantity of real domestic output demanded. 
C)  decrease in aggregate demand. 
D)  increase in aggregate demand.

Question 2

The determinants of aggregate supply:

Accepted Answer

A)  are consumption, investment, government, and net export spending. 
B)  explain why real domestic output and the price level are directly related. 
C)  explain the three distinct ranges of the aggregate supply curve. 
D)  include input prices and r productivity. 
A)  are consumption, investment, government, and net export spending. 
B)  explain why real domestic output and the price level are directly related. 
C)  explain the three distinct ranges of the aggregate supply curve. 
D)  include input prices and r productivity.

Question 3

Refer to the diagram below. If the initial aggregate demand and supply curves are AD0 and AS0, the equilibrium price level and level of real domestic output will be:

Accepted Answer

A)  F and C, respectively. 
B)  G and B, respectively. 
C)  F and A, respectively. 
D)  E and B, respectively. 
A)  F and C, respectively. 
B)  G and B, respectively. 
C)  F and A, respectively. 
D)  E and B, respectively.

Question 4

Which of the following would not shift the aggregate supply curve?

Accepted Answer

A)  an increase in labour productivity 
B)  a decline in the price of imported oil 
C)  a decline in business taxes 
D)  an increase in the price level 
A)  an increase in labour productivity 
B)  a decline in the price of imported oil 
C)  a decline in business taxes 
D)  an increase in the price level

Question 5

Other things being equal, the higher the price level, the lower the level of domestic output purchased. This occurs because of:

Accepted Answer

A)  the real-balances effect. 
B)  consumer spending on capital goods. 
C)  the full-employment-unemployment rate. 
D)  the sensitivity to demand-pull inflation. 
A)  the real-balances effect. 
B)  consumer spending on capital goods. 
C)  the full-employment-unemployment rate. 
D)  the sensitivity to demand-pull inflation.

Question 6

The relationship between the aggregate demand curve and the aggregate expenditures model is shown in the fact that:

Accepted Answer

A)  a decrease in the price level shifts the aggregate expenditures schedule downward and decreases real GDP. 
B)  a decrease in the price level shifts the aggregate expenditures schedule upward and increases real GDP. 
C)  an increase in the price level shifts the aggregate expenditures schedule upward and increases real GDP. 
D)  an increase in the price level shifts the aggregate expenditures schedule downward and increases real GDP. 
A)  a decrease in the price level shifts the aggregate expenditures schedule downward and decreases real GDP. 
B)  a decrease in the price level shifts the aggregate expenditures schedule upward and increases real GDP. 
C)  an increase in the price level shifts the aggregate expenditures schedule upward and increases real GDP. 
D)  an increase in the price level shifts the aggregate expenditures schedule downward and increases real GDP.

Question 7

An increase in wealth from a substantial increase in stock prices will move the economy along the existing aggregate demand curve.

Accepted Answer

A) True 
 B)False

Question 8

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. If the price level unexpectedly increases from 100 to 125, the level of real output in the short run will:

Accepted Answer

A)  rise from $500 to $560. 
B)  fall from $500 to $440. 
C)  fall from $560 to $500. 
D)  rise from $440 to $500. 
A)  rise from $500 to $560. 
B)  fall from $500 to $440. 
C)  fall from $560 to $500. 
D)  rise from $440 to $500.

Question 9

Other things equal, the short-run aggregate supply curve shifts positions when:

Accepted Answer

A)  the price level changes. 
B)  the rate of inflation changes. 
C)  input prices change. 
D)  aggregate demand changes. 
A)  the price level changes. 
B)  the rate of inflation changes. 
C)  input prices change. 
D)  aggregate demand changes.

Question 10

Other things equal, an increase in productivity will shift the aggregate supply curve rightward.

Accepted Answer

A) True 
 B)False

Question 11

The following list of items are related to aggregate demand and/or aggregate supply.
  
-Refer to the above list. Changes in which combination of factors best explain why the aggregate supply curve would shift?

Accepted Answer

A)  1 and 2 
B)  2 and 10 
C)  3 and 6 
D)  7 and 8 
A)  1 and 2 
B)  2 and 10 
C)  3 and 6 
D)  7 and 8

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 short run, an increase in the price level from P2 to P3 will:

Accepted Answer

A)  change aggregate supply from AS2 to AS3. 
B)  increase real output from Q1 to Q2. 
C)  change aggregate supply from AS2 to AS1. 
D)  increase real output from Qf to Q2. 
A)  change aggregate supply from AS2 to AS3. 
B)  increase real output from Q1 to Q2. 
C)  change aggregate supply from AS2 to AS1. 
D)  increase real output from Qf to Q2.

Question 13

Other things equal, a reduction in personal and business taxes can be expected to:

Accepted Answer

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

Question 14

Other things equal, a decrease in the price level will:

Accepted Answer

A)  shift the short run aggregate supply curve to the left. 
B)  shift the aggregate demand curve to the left. 
C)  cause a movement up a short-run aggregate supply curve. 
D)  cause a movement down a short run aggregate supply curve. 
A)  shift the short run aggregate supply curve to the left. 
B)  shift the aggregate demand curve to the left. 
C)  cause a movement up a short-run aggregate supply curve. 
D)  cause a movement down a short run aggregate supply curve.

Question 15

"If the price level increases in Canada relative to foreign countries, then Canadian consumers will purchase more foreign goods and fewer Canadian goods." This statement describes:

Accepted Answer

A)  the output effect. 
B)  the foreign trade effect. 
C)  the real-balances effect. 
D)  the shift-of-spending effect. 
A)  the output effect. 
B)  the foreign trade effect. 
C)  the real-balances effect. 
D)  the shift-of-spending effect.

Question 16

Other things equal, an improvement in productivity will:

Accepted Answer

A)  shift the aggregate demand curve to the left. 
B)  shift the aggregate supply curve to the left. 
C)  shift the aggregate supply curve to the right. 
D)  increase the price level. 
A)  shift the aggregate demand curve to the left. 
B)  shift the aggregate supply curve to the left. 
C)  shift the aggregate supply curve to the right. 
D)  increase the price level.

Question 17

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. The wealth or real balances effect of changes in the price level is:

Accepted Answer

A)  shown by columns (1) and (2) of the table. 
B)  shown by columns (1) and (5) of the table. 
C)  shown by columns (1) and (4) of the table. 
D)  not shown by the data in the table. 
A)  shown by columns (1) and (2) of the table. 
B)  shown by columns (1) and (5) of the table. 
C)  shown by columns (1) and (4) of the table. 
D)  not shown by the data in the table.

Question 18

-Refer to the above diagrams. Assuming a constant price level, an increase in aggregate expenditures from AE1 to AE2 would:

Accepted Answer

A)  move the economy from A to B along AD1. 
B)  move the economy from B to A along AD1. 
C)  increase aggregate demand from AD1 to AD2. 
D)  decrease aggregate demand from AD2 to AD1. 
A)  move the economy from A to B along AD1. 
B)  move the economy from B to A along AD1. 
C)  increase aggregate demand from AD1 to AD2. 
D)  decrease aggregate demand from AD2 to AD1.

Question 19

With output and input prices fixed, the immediate short run aggregate supply curve is:

Accepted Answer

A)  vertical. 
B)  upward sloping. 
C)  horizontal. 
D)  downward sloping. 
A)  vertical. 
B)  upward sloping. 
C)  horizontal. 
D)  downward sloping.

Question 20

The Canadian economy was able to achieve full employment with relative price level stability in the early 2000 because aggregate:

Accepted Answer

A)  demand increased. 
B)  supply decreased. 
C)  demand increased and aggregate supply increased. 
D)  demand decreased and aggregate supply increased. 
A)  demand increased. 
B)  supply decreased. 
C)  demand increased and aggregate supply increased. 
D)  demand decreased and aggregate supply increased.

An increase in taxes will cause a(n):

The determinants of aggregate supply:

Refer to the diagram below. If the initial aggregate demand and supply curves are AD₀ and AS₀, the equilibrium price level and level of real domestic output will be:

Which of the following would not shift the aggregate supply curve?

Other things being equal, the higher the price level, the lower the level of domestic output purchased. This occurs because of:

The relationship between the aggregate demand curve and the aggregate expenditures model is shown in the fact that:

An increase in wealth from a substantial increase in stock prices will move the economy along the existing aggregate demand curve.

Other things equal, the short-run aggregate supply curve shifts positions when:

Other things equal, an increase in productivity will shift the aggregate supply curve rightward.

The following list of items are related to aggregate demand and/or aggregate supply. -Refer to the above list. Changes in which combination of factors best explain why the aggregate supply curve would shift?

-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, an increase in the price level from P₂ to P₃ will:

Other things equal, a reduction in personal and business taxes can be expected to:

Other things equal, a decrease in the price level will:

"If the price level increases in Canada relative to foreign countries, then Canadian consumers will purchase more foreign goods and fewer Canadian goods." This statement describes:

Other things equal, an improvement in productivity will:

-Refer to the above diagrams. Assuming a constant price level, an increase in aggregate expenditures from AE₁ to AE₂ would:

With output and input prices fixed, the immediate short run aggregate supply curve is:

The Canadian economy was able to achieve full employment with relative price level stability in the early 2000 because aggregate:

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

An increase in taxes will cause a(n):

The determinants of aggregate supply:

Refer to the diagram below. If the initial aggregate demand and supply curves are AD0 and AS0, the equilibrium price level and level of real domestic output will be:

Which of the following would not shift the aggregate supply curve?

Other things being equal, the higher the price level, the lower the level of domestic output purchased. This occurs because of:

The relationship between the aggregate demand curve and the aggregate expenditures model is shown in the fact that:

An increase in wealth from a substantial increase in stock prices will move the economy along the existing aggregate demand curve.

Other things equal, the short-run aggregate supply curve shifts positions when:

Other things equal, an increase in productivity will shift the aggregate supply curve rightward.

The following list of items are related to aggregate demand and/or aggregate supply. -Refer to the above list. Changes in which combination of factors best explain why the aggregate supply curve would shift?

-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, an increase in the price level from P2 to P3 will:

Other things equal, a reduction in personal and business taxes can be expected to:

Other things equal, a decrease in the price level will:

"If the price level increases in Canada relative to foreign countries, then Canadian consumers will purchase more foreign goods and fewer Canadian goods." This statement describes:

Other things equal, an improvement in productivity will:

-Refer to the above diagrams. Assuming a constant price level, an increase in aggregate expenditures from AE1 to AE2 would:

With output and input prices fixed, the immediate short run aggregate supply curve is:

The Canadian economy was able to achieve full employment with relative price level stability in the early 2000 because aggregate:

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 diagram below. If the initial aggregate demand and supply curves are AD₀ and AS₀, the equilibrium price level and level of real domestic output will be:

-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, an increase in the price level from P₂ to P₃ will:

-Refer to the above diagrams. Assuming a constant price level, an increase in aggregate expenditures from AE₁ to AE₂ would: