Question 1

An increase in consumer wealth will decrease aggregate demand.

Accepted Answer

A) True 
 B)False

Question 2

Refer to the list below.Which two factors would most likely cause a change in investment spending? The following list of items is related to aggregate demand.Entrepreneurial ability
Consumer expectations
Degree of excess capacity
Personal income tax rates
Productivity
National income abroad
Business taxes
Domestic resource availability
Prices of imported products
Profit expectations on investments

Accepted Answer

A)  2 and 5
B)  3 and 10
C)  2 and 7
D)  6 and 9E) A) and D)
F) B) and C)

Question 3

Which one of the following would increase per unit production cost and therefore shift the aggregate supply curve to the left?

Accepted Answer

A)  a reduction in business taxes
B)  an increase in the number of resources used in production
C)  an increase in the price of imported resources
D)  deregulation of industryE) A) and D)
F) None of the above

Question 4

The following aggregate demand and supply schedules are for a hypothetical economy:  Refer to the above data.If the amount of real output demanded at each price level falls by $200, the equilibrium price level and equilibrium level of real domestic output will fall to:

Accepted Answer

A)  250 and $200, respectively.
B)  200 and $300, respectively.
C)  150 and $300, respectively.
D)  150 and $200, respectively.E) A) and B)
F) All of the above

Question 5

Refer to the diagram given below. 1 and the price level increases from P1, there should have been a: A) shift in the aggregate supply curve from AS1 to AS3. B) shift in the aggregate supply curve from AS2 to AS1. C) movement along the aggregate demand curve from e2 to e1. D) movement along the aggregate demand curve from e1 to e2." class="answers-bank-image d-inline" rel="preload" > When the real output decreases from Q1 and the price level increases from P1, there should have been a:

Accepted Answer

A)  shift in the aggregate supply curve from AS1 to AS3.
B)  shift in the aggregate supply curve from AS2 to AS1.
C)  movement along the aggregate demand curve from e2 to e1.
D)  movement along the aggregate demand curve from e1 to e2.E) None of the above
F) B) and C)

Question 6

An economy is employing 2 units of capital, 5 units of raw materials, and 8 units of labour to produce its total output of 640 units.Each unit of capital costs $10, each unit of raw materials, $4, and each unit of labour, $3.Refer to the above information.As a result of the change indicated in the previous question, the aggregate:

Accepted Answer

A)  supply curve would shift to the left.
B)  supply curve would shift to the right.
C)  demand curve would shift to the left.
D)  demand curve would shift to the right.E) A) and C)
F) C) and D)

Question 7

If the dollar price of foreign currencies falls (that is, the dollar appreciates) , we would expect:

Accepted Answer

A)  aggregate demand to decrease and aggregate supply to increase.
B)  both aggregate demand and aggregate supply to decrease.
C)  both aggregate demand and aggregate supply to increase.
D)  aggregate demand to increase and aggregate supply to decrease.E) B) and C)
F) None of the above

Question 8

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.E) C) and D)
F) B) and C)

Question 9

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.E) B) and C)
F) A) and D)

Question 10

Which of the following explains why the aggregate demand schedule is downward sloping?

Accepted Answer

A)  the real-balances effect
B)  the interest rate effect
C)  the foreign trade effect
D)  all of theseE) All of the above
F) A) and D)

Question 11

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.E) B) and C)
F) A) and D)

Question 12

Which effect best explains the downward slope of the aggregate demand curve?

Accepted Answer

A)  a multiplier effect
B)  an income effect
C)  a substitution effect
D)  a real-balances effectE) A) and C)
F) All of the above

Question 13

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 ratesE) C) and D)
F) B) and D)

Question 14

Refer to the figure below. 1 and AS1 represent the original aggregate demand and aggregate supply curves, respectively.AD2 and AS2 show the new aggregate demand and supply curves.The changes in aggregate demand and aggregate supply result in a(n) : A) increase in the price level. B) increase in the real output and no change in the price level. C) increase in the real output and the price level. D) decline in the real output and no change in the price level." class="answers-bank-image d-inline" rel="preload" > In the above figure, AD1 and AS1 represent the original aggregate demand and aggregate supply curves, respectively.AD2 and AS2 show the new aggregate demand and supply curves.The changes in aggregate demand and aggregate supply result in a(n) :

Accepted Answer

A)  increase in the price level.
B)  increase in the real output and no change in the price level.
C)  increase in the real output and the price level.
D)  decline in the real output and no change in the price level.E) A) and C)
F) B) and D)

Question 15

A factor that shifts the aggregate demand curve for an economy is:

Accepted Answer

A)  domestic factor prices.
B)  the price level in the economy.
C)  the price of resources imported by the economy.
D)  technology.E) All of the above
F) A) and D)

Question 16

Other things equal, an improvement in productivity will:

Accepted Answer

A)  tend to increase the equilibrium price level.
B)  shift the aggregate supply curve to the left.
C)  shift the aggregate supply curve to the right.
D)  shift the aggregate demand curve to the left.E) A) and B)
F) None of the above

Question 17

A movement downward along an existing aggregate demand curve is equivalent to a(n) :

Accepted Answer

A)  decrease in aggregate demand.
B)  increase in aggregate demand.
C)  upward shift in the aggregate expenditures schedule.
D)  downward shift in the aggregate expenditures schedule.E) A) and B)
F) All of the above

Question 18

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.E) C) and D)
F) A) and C)

Question 19

The Great Moderation refers to:

Accepted Answer

A)  the period from 1982 to 2008 when business cycles were longer and relatively mild.
B)  the recession that began in 2008 and continued through to 2009.
C)  the fact that businesses and governments cannot smooth out the business cycle.
D)  the period from 1982 to 2008 when cycles were shorter.E) A) and B)
F) A) and D)

Question 20

Shifts in the aggregate supply curve are caused by changes in:

Accepted Answer

A)  consumption spending.
B)  the quantity of real output demanded.
C)  the quantity of real output supplied.
D)  one or more of the determinants of aggregate supply.E) B) and C)
F) A) and D)

Exam 12: Part B: Aggregate Demand and Aggregate Supply

The following aggregate demand and supply schedules are for a hypothetical economy: Refer to the above data.If the amount of real output demanded at each price level falls by $200, the equilibrium price level and equilibrium level of real domestic output will fall to:

Correct Answer
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Refer to the figure below. In the above figure, AD₁ and AS₁ represent the original aggregate demand and aggregate supply curves, respectively.AD₂ and AS₂ show the new aggregate demand and supply curves.The changes in aggregate demand and aggregate supply result in a(n) :

Correct Answer
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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:

Correct Answer
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Correct Answer
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A movement downward along an existing aggregate demand curve is equivalent to a(n) :

Correct Answer
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Which of the following explains why the aggregate demand schedule is downward sloping?

Correct Answer
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Which effect best explains the downward slope of the aggregate demand curve?

Correct Answer
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Shifts in the aggregate supply curve are caused by changes in:

Correct Answer
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Which one of the following would increase per unit production cost and therefore shift the aggregate supply curve to the left?

Correct Answer
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Correct Answer
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Refer to the diagram given below. When the real output decreases from Q₁ and the price level increases from P₁, there should have been a:

Correct Answer
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An increase in consumer wealth will decrease aggregate demand.

Correct Answer
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The Great Moderation refers to:

Correct Answer
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Correct Answer
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A factor that shifts the aggregate demand curve for an economy is:

Correct Answer
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Efficiency wages will:

Correct Answer
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Other things equal, an improvement in productivity will:

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

Correct Answer
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If the dollar price of foreign currencies falls (that is, the dollar appreciates) , we would expect:

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

Correct Answer
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Exam 12: Part B: Aggregate Demand and Aggregate Supply

The following aggregate demand and supply schedules are for a hypothetical economy: Refer to the above data.If the amount of real output demanded at each price level falls by $200, the equilibrium price level and equilibrium level of real domestic output will fall to:

Correct AnswerverifiedShow Answer

Refer to the figure below. In the above figure, AD1 and AS1 represent the original aggregate demand and aggregate supply curves, respectively.AD2 and AS2 show the new aggregate demand and supply curves.The changes in aggregate demand and aggregate supply result in a(n) :

Correct AnswerverifiedShow Answer

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:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A movement downward along an existing aggregate demand curve is equivalent to a(n) :

Correct AnswerverifiedShow Answer

Which of the following explains why the aggregate demand schedule is downward sloping?

Correct AnswerverifiedShow Answer

Which effect best explains the downward slope of the aggregate demand curve?

Correct AnswerverifiedShow Answer

Shifts in the aggregate supply curve are caused by changes in:

Correct AnswerverifiedShow Answer

Which one of the following would increase per unit production cost and therefore shift the aggregate supply curve to the left?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Refer to the diagram given below. When the real output decreases from Q1 and the price level increases from P1, there should have been a:

Correct AnswerverifiedShow Answer

An increase in consumer wealth will decrease aggregate demand.

Correct AnswerverifiedShow Answer

The Great Moderation refers to:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A factor that shifts the aggregate demand curve for an economy is:

Correct AnswerverifiedShow Answer

Efficiency wages will:

Correct AnswerverifiedShow Answer

Other things equal, an improvement in productivity will:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the dollar price of foreign currencies falls (that is, the dollar appreciates) , we would expect:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct Answer
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Refer to the figure below. In the above figure, AD₁ and AS₁ represent the original aggregate demand and aggregate supply curves, respectively.AD₂ and AS₂ show the new aggregate demand and supply curves.The changes in aggregate demand and aggregate supply result in a(n) :

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Refer to the diagram given below. When the real output decreases from Q₁ and the price level increases from P₁, there should have been a:

Correct Answer
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