Question 1

An increase in the money wage rate shifts

Accepted Answer

A)  both the SAS curve and the LAS curve rightward.
B)  both the SAS curve and the LAS curve leftward.
C)  the LAS curve rightward, but leaves the SAS curve unchanged.
D)  the SAS curve rightward, but leaves the LAS curve unchanged.
E)  the SAS curve leftward, but leaves the LAS curve unchanged.F) A) and B)
G) A) and E)

Question 2

Use the figure below to answer the following questions.
  Figure 10.3.3
-Refer to Figure 10.3.3.In which of the graphs would we predict that eventually the price level will rise and real GDP will fall, everything else remaining the same?

Accepted Answer

A)  a only
B)  b only
C)  c only
D)  d only
E)  both c and dF) B) and C)
G) A) and B)

Question 3

Which of the following situations illustrates how monetary policy can influence aggregate demand?

Accepted Answer

A)  Investors, anticipating an erosion of financial wealth due to inflation, decide to save more.As a result, aggregate demand decreases.
B)  The Bank of Canada raises interest rates so people plan to buy fewer consumer durables.As a result, aggregate demand decreases.
C)  The government increases its expenditures.The demand for loanable funds increases, which raises the real interest rate.Investment increases.
D)  The government reduces the goods and services tax.As a result, consumption expenditure increases and aggregate demand increases.
E)  The exchange rate value of the Canadian dollar rises.As a result, people living near the U.S.- Canada border increase their imports of goods and net exports decrease.F) B) and C)
G) B) and D)

Question 4

Use the table below to answer the following questions.
Table 10.3.1
 
-Refer to Table 10.3.1.In short- run macroeconomic equilibrium, the price level is _______ and real GDP is _______ billion.

Accepted Answer

A)  120; $600
B)  125; $550
C)  130; $500
D)  120; $500
E)  130; $600F) None of the above
G) B) and D)

Question 5

Use the figure below to answer the following questions.
  Figure 10.3.1
-Refer to Figure 10.3.1.The economy is at its short- run macroeconomic equilibrium.There is a difference between _______ equilibrium real GDP and potential GDP of $_______ billion.

Accepted Answer

A)  below full- employment; 20
B)  actual; 0
C)  below full- employment; 40
D)  above full- employment; 40
E)  above full- employment; 20F) B) and C)
G) B) and E)

Question 6

Which one of the following newspaper quotations describes a shift of only the SAS curve?

Accepted Answer

A)  "The recent tornadoes destroyed many factories in Calgary and Edmonton."
B)  "The decrease in consumer spending may lead to a recession."
C)  "Recent higher wage settlements are expected to cause higher inflation this year."
D)  "Growth has been unusually high the last few years due to more women entering the work force."
E)  "The increase in consumer spending is expected to lead to inflation, without any increase in real GDP."F) B) and C)
G) B) and D)

Question 7

Full- employment equilibrium occurs when

Accepted Answer

A)  all who are willing and able to work are working, and the wage level is set so that the GDP deflator equals 110.
B)  real GDP equals potential GDP.
C)  aggregate demand equals short- run aggregate supply.
D)  real GDP equals potential GDP and the wage level is set so that the GDP deflator equals 110.
E)  all who are willing and able to work, are working.F) A) and B)
G) All of the above

Question 8

Use the figure below to answer the following questions.
  Figure 10.3.1
-Refer to Figure 10.3.1.As the economy automatically adjusts to long- run equilibrium, the

Accepted Answer

A)  LAS curve shifts leftward.
B)  AD curve shifts rightward.
C)  SAS curve shifts leftward.
D)  AD curve shifts leftward.
E)  SAS curve shifts rightward.F) All of the above
G) A) and B)

Question 9

Use the figure below to answer the following questions.
  Figure 10.1.1
-Refer to Figure 10.1.1.Which graph illustrates the effect of a decrease in factor prices?

Accepted Answer

A)  a
B)  b
C)  c
D)  d
E)  a and bF) None of the above
G) A) and B)

Question 10

The long- run aggregate supply curve is vertical because

Accepted Answer

A)  a vertical long- run aggregate supply curve indicates the maximum output rate that an economy can ever attain.
B)  a vertical long- run supply curve indicates that an increase in aggregate demand will lead to greater real GDP, but not greater nominal GDP.
C)  potential GDP never changes.
D)  actual output can never exceed, even temporarily, the quantity of output determined by the economy's long- run aggregate supply curve.
E)  potential GDP is independent of the price level.F) A) and D)
G) C) and E)

Question 11

Use the table below to answer the following questions.
Table 10.3.1
 
-Refer to Table 10.3.1.The economy is in

Accepted Answer

A)  a below full- employment equilibrium, and factor prices will decrease.
B)  an above full- employment equilibrium, and factor prices will increase.
C)  an above full- employment equilibrium, and factor prices will decrease.
D)  a long- run equilibrium, and factor prices will not change.
E)  a below full- employment equilibrium, and factor prices will increase.F) A) and D)
G) C) and D)

Question 12

Consider an economy starting from a position of full employment.Which one of the following changes does not occur as a result of a decrease in aggregate demand?

Accepted Answer

A)  A recessionary gap arises.
B)  Factor prices decrease in the long run, shifting the short- run aggregate supply curve rightward.
C)  The level of real GDP decreases in the short run.
D)  The long- run aggregate supply curve shifts leftward to create the new long- run equilibrium.
E)  The price level decreases.F) B) and D)
G) All of the above

Question 13

Use the figure below to answer the following questions.
  Figure 10.2.1
-Refer to Figure 10.2.1.Which graph illustrates the effect of an increase in government expenditure?

Accepted Answer

A)  a only
B)  b only
C)  c only
D)  d only
E)  Both a and cF) A) and C)
G) C) and D)

Question 14

The world goes into an expansion.Starting from a position of long- run equilibrium, what effect does this event have on Canada's economy in the short run?

Accepted Answer

A)  Real GDP increases and the price level rises.
B)  Real GDP decreases and the price level falls.
C)  Real GDP increases and the price level falls.
D)  Real GDP decreases and the price level rises.
E)  There is no change in either real GDP or the price level.F) A) and E)
G) A) and B)

Question 15

Which of the following does not change aggregate demand?

Accepted Answer

A)  a rise in the exchange rate
B)  an increase in expected future income
C)  a change in monetary policy
D)  a change in fiscal policy
E)  an advance in technologyF) A) and E)
G) None of the above

Question 16

The actual unemployment rate equals the natural unemployment rate.

Accepted Answer

A)  1) is true; 2) is false.
B)  2) is true; 1) is false.
C)  1) and 2) are false.
D)  1) and 2) are true.
E)  1) is true; 2) is true if the natural unemployment rate is too high.F) A) and E)
G) C) and D)

Question 17

Use the figure below to answer the following questions.
  Figure 10.3.2
-Refer to Figure 10.3.2.If the economy automatically adjusts to long- run equilibrium, then

Accepted Answer

A)  the actual unemployment rate exceeds the natural unemployment rate.
B)  real GDP is $600 billion.
C)  the SAS curve shifts rightward.
D)  the price level rises to 90.
E)  potential GDP decreases.F) A) and E)
G) B) and E)

Question 18

Suppose there is an increase in the quantity of capital.As a result, the SAS

Accepted Answer

A)  and the LAS curves both shift rightward.
B)  curve does not shift but the LAS curve shifts leftward.
C)  curve does not shift but the LAS curve shifts rightward.
D)  curve shifts rightward, but the LAS curve does not shift.
E)  and the LAS curves both shift leftward.F) C) and E)
G) A) and D)

Question 19

Which of the following will lower the price level for sure?

Accepted Answer

A)  The AD curve shifts rightward and the SAS curve remains unchanged.
B)  The AD curve shifts rightward and the SAS curve shifts leftward.
C)  The LAS curve shifts leftward.
D)  The SAS curve shifts leftward.
E)  The AD curve shifts leftward and the SAS curve shifts rightward.F) A) and E)
G) A) and B)

Question 20

Autoworkers agree to a cut in the nominal wage rate.This event _______ short- run aggregate supply and _______ long- run aggregate supply.

Accepted Answer

A)  increases; does not change;
B)  does not change; does not change
C)  decreases; does not change
D)  increases; increases
E)  decreases; does not change;F) C) and D)
G) D) and E)

Exam 10: Aggregate Supply and Aggregate Demand

Use the figure below to answer the following questions. Figure 10.3.2 -Refer to Figure 10.3.2.If the economy automatically adjusts to long- run equilibrium, then

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Use the figure below to answer the following questions. Figure 10.3.1 -Refer to Figure 10.3.1.As the economy automatically adjusts to long- run equilibrium, the

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Use the figure below to answer the following questions. Figure 10.3.1 -Refer to Figure 10.3.1.The economy is at its short- run macroeconomic equilibrium.There is a difference between _______ equilibrium real GDP and potential GDP of $_______ billion.

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Consider an economy starting from a position of full employment.Which one of the following changes does not occur as a result of a decrease in aggregate demand?

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The actual unemployment rate equals the natural unemployment rate.

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Suppose there is an increase in the quantity of capital.As a result, the SAS

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Use the figure below to answer the following questions. Figure 10.1.1 -Refer to Figure 10.1.1.Which graph illustrates the effect of a decrease in factor prices?

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Use the table below to answer the following questions. Table 10.3.1 -Refer to Table 10.3.1.In short- run macroeconomic equilibrium, the price level is _______ and real GDP is _______ billion.

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Autoworkers agree to a cut in the nominal wage rate.This event _______ short- run aggregate supply and _______ long- run aggregate supply.

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Use the figure below to answer the following questions. Figure 10.2.1 -Refer to Figure 10.2.1.Which graph illustrates the effect of an increase in government expenditure?

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Which of the following does not change aggregate demand?

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Full- employment equilibrium occurs when

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Use the table below to answer the following questions. Table 10.3.1 -Refer to Table 10.3.1.The economy is in

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Which of the following will lower the price level for sure?

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Use the figure below to answer the following questions. Figure 10.3.3 -Refer to Figure 10.3.3.In which of the graphs would we predict that eventually the price level will rise and real GDP will fall, everything else remaining the same?

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The long- run aggregate supply curve is vertical because

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The world goes into an expansion.Starting from a position of long- run equilibrium, what effect does this event have on Canada's economy in the short run?

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An increase in the money wage rate shifts

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Which one of the following newspaper quotations describes a shift of only the SAS curve?

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Which of the following situations illustrates how monetary policy can influence aggregate demand?

Correct AnswerverifiedShow Answer

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Use the figure below to answer the following questions. Figure 10.3.1 -Refer to Figure 10.3.1.The economy is at its short- run macroeconomic equilibrium.There is a difference between _ equilibrium real GDP and potential GDP of $_ billion.

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Use the table below to answer the following questions. Table 10.3.1 -Refer to Table 10.3.1.In short- run macroeconomic equilibrium, the price level is _ and real GDP is _ billion.

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Autoworkers agree to a cut in the nominal wage rate.This event _ short- run aggregate supply and _ long- run aggregate supply.

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