Question 1

1 to AS2,then the price level will: A)  increase and real domestic output will increase. B)  decrease and real domestic output will increase. C)  increase and real domestic output will decrease. D)  decrease and real domestic output will decrease." class="answers-bank-image d-inline" rel="preload" >
-Refer to the above diagram.If aggregate supply shifts from AS1 to AS2,then the price level will:

Accepted Answer

A)   increase and real domestic output will increase.
B)   decrease and real domestic output will increase.
C)   increase and real domestic output will decrease.
D)   decrease and real domestic output will decrease.E) A) and D)
F) B) and C) C

Question 2

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 increasedE) None of the above
F) C) and D)

Question 3

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) A) and B)

Question 4

An increase in the GDP price level will:

Accepted Answer

A)   decrease aggregate demand.
B)   increase the quantity of real domestic output demanded.
C)   increase aggregate demand.
D)   decrease the quantity of real domestic output demanded.E) B) and D)
F) None of the above

Question 5

Using the aggregate demand-aggregate supply (short-run)model,explain how a reduction in business taxes would affect the economy.

Accepted Answer

A reduction in business taxes affects bo...

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

Question 7

An increase in productivity will shift the aggregate:

Accepted Answer

A)   demand curve leftward.
B)   demand curve rightward.
C)   supply curve rightward.
D)   supply curve leftward.E) A) and B)
F) A) and C)

Question 8

The aggregate supply curve slopes downward.

Accepted Answer

A) True 
 B)False

Question 9

The determinants of aggregate demand:

Accepted Answer

A)   explain why the aggregate demand curve is downward sloping.
B)   explain shifts in the aggregate demand curve.
C)   demonstrate why real output and the price level are inversely related.
D)   include input prices and resource productivity.E) A) and C)
F) A) and B) B

Question 10

The aggregate demand curve shows the:

Accepted Answer

A)   inverse relationship between the price level and real GDP purchased.
B)   direct relationship between the price level and real GDP produced.
C)   inverse relationship between interest rates and real GDP produced.
D)   direct relationship between real-balances and real GDP purchased.E) None of the above
F) All of the above

Question 11

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

Question 12

What is the effect on the multiplier when an increase in aggregate demand also causes the price level to rise?

Accepted Answer

The multiplier effect is weakened with p...

Question 13

Refer to the diagram below.Which of the following would shift the aggregate demand curve from AD2 to AD1? 2 to AD1?   A)  a decline in personal income tax rates B)  an increase in the international value of the dollar C)  an increase in government spending D)  an upward revision of profit expectations on investment projects" class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)   a decline in personal income tax rates
B)   an increase in the international value of the dollar
C)   an increase in government spending
D)   an upward revision of profit expectations on investment projectsE) B) and C)
F) All of the above

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

Question 15

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) A) and C)
F) A) and B)

Question 16

2 to AE1 resulting from the wealth,interest rate,and foreign trade effects would be depicted as: A)  a movement from A to B along aggregate demand curve AD1. B)  a movement from B to A along aggregate demand curve AD1. C)  a shift of aggregate demand from AD1 to AD2. D)  a shift of aggregate demand from AD2 to AD1." class="answers-bank-image d-inline" rel="preload" >
-Refer to the above diagrams.A decline in aggregate expenditures from AE2 to AE1 resulting from the wealth,interest rate,and foreign trade effects would be depicted as:

Accepted Answer

A)   a movement from A to B along aggregate demand curve AD1.
B)   a movement from B to A along aggregate demand curve AD1.
C)   a shift of aggregate demand from AD1 to AD2.
D)   a shift of aggregate demand from AD2 to AD1.E) A) and D)
F) B) and C)

Question 17

In terms of aggregate supply,in the immediate short run:

Accepted Answer

A)   the price level is variable.
B)   real output is fixed.
C)   nominal wages are variable.
D)   both input prices and output prices are fixed.E) A) and C)
F) C) and D)

Question 18

In deriving the aggregate demand curve from the aggregate expenditures model we note that:

Accepted Answer

A)   the wealth or real balances effect is irrelevant to both models.
B)   a change in the price level will have no impact on the aggregate expenditures schedule.
C)   an increase (decrease) in the price level shifts the aggregate expenditures schedule upward (downward) .
D)   an increase (decrease) in the price level shifts the aggregate expenditures schedule downward (upward) .E) A) and B)
F) None of the above D

Question 19

2 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: 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." class="answers-bank-image d-inline" rel="preload" >
-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.E) A) and D)
F) B) and C)

Question 20

An increase in business taxes will shift the aggregate supply curve leftward.

Accepted Answer

A) True 
 B)False

Exam 12: Aggregate Demand and Aggregate Supply

-Refer to the above diagram.If aggregate supply shifts from AS1 to AS2,then the price level will:

Correct AnswerverifiedC

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

An increase in the GDP price level will:

Correct AnswerverifiedShow Answer

Using the aggregate demand-aggregate supply (short-run)model,explain how a reduction in business taxes would affect the economy.

Correct AnswerverifiedA reduction in business taxes affects bo...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

An increase in productivity will shift the aggregate:

Correct AnswerverifiedShow Answer

The aggregate supply curve slopes downward.

Correct AnswerverifiedShow Answer

The determinants of aggregate demand:

Correct AnswerverifiedB

The aggregate demand curve shows the:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

What is the effect on the multiplier when an increase in aggregate demand also causes the price level to rise?

Correct AnswerverifiedThe multiplier effect is weakened with p...View AnswerShow Answer

Refer to the diagram below.Which of the following would shift the aggregate demand curve from AD2 to AD1?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Efficiency wages will:

Correct AnswerverifiedShow Answer

-Refer to the above diagrams.A decline in aggregate expenditures from AE2 to AE1 resulting from the wealth,interest rate,and foreign trade effects would be depicted as:

Correct AnswerverifiedShow Answer

In terms of aggregate supply,in the immediate short run:

Correct AnswerverifiedShow Answer

In deriving the aggregate demand curve from the aggregate expenditures model we note that:

Correct AnswerverifiedD

-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:

Correct AnswerverifiedShow Answer

An increase in business taxes will shift the aggregate supply curve leftward.

Correct AnswerverifiedShow Answer

-Refer to the above diagram.If aggregate supply shifts from AS₁ to AS₂,then the price level will:

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C

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A reduction in business taxes affects bo...
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B

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The multiplier effect is weakened with p...
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Refer to the diagram below.Which of the following would shift the aggregate demand curve from AD₂ to AD₁?

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-Refer to the above diagrams.A decline in aggregate expenditures from AE₂ to AE₁ resulting from the wealth,interest rate,and foreign trade effects would be depicted as:

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D

-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:

Correct Answer
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Correct Answer
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