Question 1

FIGURE 23-4 Refer to Figure 23-4.Suppose the Canadian economy is initially in equilibrium at point A.An unexpected shock then shifts both the AD and the AS curves as shown and results in a new equilibrium represented by point B.Which of the following events could cause such a shock?

Accepted Answer

A)  an increase in the net tax rate
B)  a decrease in firms' desired investment expenditures
C)  an increase in factor prices
D)  a decrease in labour productivity
E)  a decrease in the world price of oilF) C) and E)
G) C) and D)

Question 2

FIGURE 23-3 Refer to Figure 23-3.Which of the following statements best describes the supply side of Economy B?

Accepted Answer

A)  Unit costs are rising rapidly,but firms can produce more output by employing standby capacity and overtime labour,for example,with no increase in the price level.
B)  Firms are producing well below their capacity and are willing to produce more only if prices rise.
C)  Unit costs are rising rapidly as firms are producing beyond their capacity.Firms will produce more only if prices increase.
D)  Firms are producing well below their capacity and are willing to produce more output with no increase in price.
E)  Firms are not able to produce more output because there is no excess capacity in the economy.F) A) and B)
G) D) and E)

Question 3

FIGURE 23-5 Refer to Figure 23-5.Suppose that an increase in autonomous investment caused the AD curve to shift to the right,as shown.If the simple multiplier in this model is 4,then how much was the increase in investment?

Accepted Answer

A)  30
B)  40
C)  50
D)  12
E)  not enough information to knowF) C) and D)
G) B) and E)

Question 4

Consider the economy's aggregate supply curve.Other things being equal,firms' unit costs will tend to fall if

Accepted Answer

A)  there is a rise in the price of oil.
B)  the government increases payroll taxes.
C)  wages fall.
D)  wage and price controls are in effect.
E)  wage increases are less than productivity increases.F) A) and B)
G) A) and C)

Question 5

Consider the basic AD/AS model.When wage rates rise faster than the increase in labour productivity,the

Accepted Answer

A)  AD curve shifts left.
B)  AS curve shifts upward.
C)  output gap falls.
D)  output gap increases.
E)  AS curve shifts downward.F) B) and C)
G) A) and E)

Question 6

Aggregate supply shocks cause the price level and real GDP to change in

Accepted Answer

A)  the same direction with price changing by more than output.
B)  the same direction and by the same amount.
C)  opposite directions with price changing by less than output.
D)  opposite directions and not necessarily by the same amount.
E)  opposite directions but by the same amount.F) D) and E)
G) A) and C) D

Question 7

In the basic AD/AS model,the effect of an aggregate demand shock is divided between a change in output and a change in the price level.How the effect is divided depends on the

Accepted Answer

A)  amount of inflation in the economy.
B)  position of the AE curve.
C)  size of the simple multiplier.
D)  slope of the AD curve.
E)  slope of the AS curve.F) None of the above
G) B) and C)

Question 8

Which of the following could cause the economy's AS curve to shift upward in the short run?

Accepted Answer

A)  an increase in the cost of capital
B)  a decrease in the cost of capital
C)  a decrease in nominal wages
D)  a decrease in the price level
E)  an improvement in technologyF) None of the above
G) C) and E)

Question 9

Consider a simple macro-model with demand-determined output.An exogenous increase in the domestic price level will ________ the real value of the private sector's wealth,which leads to ________ in autonomous consumption and thus ________ shift in the AE function.

Accepted Answer

A)  increase; a decrease; a downward
B)  increase; an increase; a downward
C)  increase; an increase; an upward
D)  reduce; a decrease; a downward
E)  reduce; an increase; an upwardF) A) and B)
G) A) and C)

Question 10

Which of the following could cause a movement along the economy's AS curve?

Accepted Answer

A)  a change in labour productivity
B)  a change in the cost of capital
C)  a change in the price level
D)  a change in technology
E)  a change in the wage rateF) B) and C)
G) C) and D)

Question 11

0.Now,suppose the AE curve shifts to AE1 and we move to a new equilibrium level of GDP at Y1 and point F on AD1.A possible cause of this change in equilibrium is A) an exogenous rise in the price level. B) an exogenous fall in the price level. C) an increase in autonomous consumption. D) a decrease in desired net exports. E) an increase in government purchases." class="answers-bank-image d-inline" rel="preload" > FIGURE 23-1 Refer to Figure 23-1.Assume the economy is initially in equilibrium with desired aggregate expenditure equal to real GDP at point V.The price level is P0.Now,suppose the AE curve shifts to AE1 and we move to a new equilibrium level of GDP at Y1 and point F on AD1.A possible cause of this change in equilibrium is

Accepted Answer

A)  an exogenous rise in the price level.
B)  an exogenous fall in the price level.
C)  an increase in autonomous consumption.
D)  a decrease in desired net exports.
E)  an increase in government purchases.F) B) and E)
G) A) and D)

Question 12

Which of the following would likely cause a downward parallel shift in the AE curve and a leftward shift in the AD curve?

Accepted Answer

A)  an increase in the business confidence of firms
B)  a reduction in government purchases
C)  a decrease in the MPC
D)  a decrease in the price level
E)  an increase in the price levelF) A) and E)
G) C) and D)

Question 13

FIGURE 23-2 Refer to Figure 23-2.Which of the following events could cause the upward shift of the AS curve?

Accepted Answer

A)  improvements in communications technology
B)  a decrease in business confidence that reduces desired investment
C)  a recession in the U.S.that reduces our net exports
D)  a major discovery of new oil reserves that will increase the world supply
E)  a massive drought that reduces agricultural outputF) C) and D)
G) B) and C)

Question 14

Which of the following explains why we assume that the economy's aggregate supply (AS) curve has a positive slope?

Accepted Answer

A)  Inputs become more expensive at higher levels of output.
B)  Inputs become less expensive at higher levels of output.
C)  Firms' unit costs rise as output increases.
D)  Firms' unit costs fall as output increases.
E)  Aggregate demand increases at higher levels of national income.F) All of the above
G) C) and E) C

Question 15

Over the horizontal range of the economy's AS curve (assuming such a range exists) ,a rightward shift of the AD curve will result in

Accepted Answer

A)  an increase in prices and no change in real GDP.
B)  an increase in real GDP and no change in prices.
C)  an increase in both real GDP and prices.
D)  a decrease in both real GDP and prices.
E)  a decrease in real GDP but no change in prices.F) A) and B)
G) C) and E) B

Question 16

FIGURE 23-5 Refer to Figure 23-5.Suppose that an increase in autonomous investment caused the AD curve to shift to the right,as shown.If the simple multiplier in this model is 5,then what is the value of the multiplier?

Accepted Answer

A)  1.2
B)  1.5
C)  4.0
D)  5.0
E)  not enough information to knowF) C) and D)
G) A) and B)

Question 17

Consider the following news headline: "Governments plan massive hospital construction programs across the country." Choose the statement below that best describes the likely macroeconomic effects.

Accepted Answer

A)  The AD curve shifts to the left; the price level falls and real GDP falls.
B)  The AD curve shifts to the right; the price level rises and real GDP rises.
C)  The AD curve shifts to the right and the AS curve shifts to the left; the price level rises and the effect on real GDP is indeterminate.
D)  The AD curve shifts to the left and the AS curve shifts to the right; the price level falls and the effect on real GDP is indeterminate.
E)  The AD and AS curves both shift to the right; the effect on the price level is indeterminate and real GDP rises.F) A) and E)
G) A) and D)

Question 18

In the short run,the aggregate supply curve has a positive slope because,as the price level rises,producers can

Accepted Answer

A)  accumulate inventories.
B)  charge a higher price sufficient to cover their higher unit costs.
C)  experience rising factor prices.
D)  produce less in response to falling profits.
E)  increase output at unchanged unit costs.F) B) and D)
G) A) and B)

Question 19

Consider the AD/AS model.Suppose there is a decrease in aggregate demand and,simultaneously,an increase in aggregate supply.The result will be a

Accepted Answer

A)  rise in real GDP but price level changes will be indeterminate.
B)  rise in real GDP and a rise in the price level.
C)  rise in real GDP and a fall in the price level.
D)  an indeterminate change in real GDP and a rise in the price level.
E)  an indeterminate change in real GDP and a fall in the price level.F) D) and E)
G) A) and E)

Question 20

Which of the following events would cause the AE function to shift upwards in a parallel way?

Accepted Answer

A)  an increase in the MPC
B)  a decrease in the net tax rate
C)  a decrease in the business confidence of firms
D)  a decrease in foreign income
E)  a decrease in the aggregate price levelF) A) and B)
G) A) and C)

Exam 23: Real Gdp and the Price Level in the Short Run

FIGURE 23-4 Refer to Figure 23-4.Suppose the Canadian economy is initially in equilibrium at point A.An unexpected shock then shifts both the AD and the AS curves as shown and results in a new equilibrium represented by point B.Which of the following events could cause such a shock?

Correct Answer
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FIGURE 23-3 Refer to Figure 23-3.Which of the following statements best describes the supply side of Economy B?

Correct Answer
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FIGURE 23-5 Refer to Figure 23-5.Suppose that an increase in autonomous investment caused the AD curve to shift to the right,as shown.If the simple multiplier in this model is 4,then how much was the increase in investment?

Correct Answer
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Consider the economy's aggregate supply curve.Other things being equal,firms' unit costs will tend to fall if

Correct Answer
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Consider the basic AD/AS model.When wage rates rise faster than the increase in labour productivity,the

Correct Answer
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Aggregate supply shocks cause the price level and real GDP to change in

Correct Answer
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D

In the basic AD/AS model,the effect of an aggregate demand shock is divided between a change in output and a change in the price level.How the effect is divided depends on the

Correct Answer
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Which of the following could cause the economy's AS curve to shift upward in the short run?

Correct Answer
verified

Consider a simple macro-model with demand-determined output.An exogenous increase in the domestic price level will the real value of the private sector's wealth,which leads to in autonomous consumption and thus shift in the AE function.

Correct Answer
verified

Which of the following could cause a movement along the economy's AS curve?

Correct Answer
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Correct Answer
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Which of the following would likely cause a downward parallel shift in the AE curve and a leftward shift in the AD curve?

Correct Answer
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FIGURE 23-2 Refer to Figure 23-2.Which of the following events could cause the upward shift of the AS curve?

Correct Answer
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Which of the following explains why we assume that the economy's aggregate supply (AS) curve has a positive slope?

Correct Answer
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C

Over the horizontal range of the economy's AS curve (assuming such a range exists) ,a rightward shift of the AD curve will result in

Correct Answer
verified
B

FIGURE 23-5 Refer to Figure 23-5.Suppose that an increase in autonomous investment caused the AD curve to shift to the right,as shown.If the simple multiplier in this model is 5,then what is the value of the multiplier?

Correct Answer
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Consider the following news headline: "Governments plan massive hospital construction programs across the country." Choose the statement below that best describes the likely macroeconomic effects.

Correct Answer
verified

In the short run,the aggregate supply curve has a positive slope because,as the price level rises,producers can

Correct Answer
verified

Consider the AD/AS model.Suppose there is a decrease in aggregate demand and,simultaneously,an increase in aggregate supply.The result will be a

Correct Answer
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Which of the following events would cause the AE function to shift upwards in a parallel way?

Correct Answer
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Exam 23: Real Gdp and the Price Level in the Short Run

FIGURE 23-4 Refer to Figure 23-4.Suppose the Canadian economy is initially in equilibrium at point A.An unexpected shock then shifts both the AD and the AS curves as shown and results in a new equilibrium represented by point B.Which of the following events could cause such a shock?

Correct AnswerverifiedShow Answer

FIGURE 23-3 Refer to Figure 23-3.Which of the following statements best describes the supply side of Economy B?

Correct AnswerverifiedShow Answer

FIGURE 23-5 Refer to Figure 23-5.Suppose that an increase in autonomous investment caused the AD curve to shift to the right,as shown.If the simple multiplier in this model is 4,then how much was the increase in investment?

Correct AnswerverifiedShow Answer

Consider the economy's aggregate supply curve.Other things being equal,firms' unit costs will tend to fall if

Correct AnswerverifiedShow Answer

Consider the basic AD/AS model.When wage rates rise faster than the increase in labour productivity,the

Correct AnswerverifiedShow Answer

Aggregate supply shocks cause the price level and real GDP to change in

Correct AnswerverifiedD

In the basic AD/AS model,the effect of an aggregate demand shock is divided between a change in output and a change in the price level.How the effect is divided depends on the

Correct AnswerverifiedShow Answer

Which of the following could cause the economy's AS curve to shift upward in the short run?

Correct AnswerverifiedShow Answer

Consider a simple macro-model with demand-determined output.An exogenous increase in the domestic price level will ________ the real value of the private sector's wealth,which leads to ________ in autonomous consumption and thus ________ shift in the AE function.

Correct AnswerverifiedShow Answer

Which of the following could cause a movement along the economy's AS curve?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following would likely cause a downward parallel shift in the AE curve and a leftward shift in the AD curve?

Correct AnswerverifiedShow Answer

FIGURE 23-2 Refer to Figure 23-2.Which of the following events could cause the upward shift of the AS curve?

Correct AnswerverifiedShow Answer

Which of the following explains why we assume that the economy's aggregate supply (AS) curve has a positive slope?

Correct AnswerverifiedC

Over the horizontal range of the economy's AS curve (assuming such a range exists) ,a rightward shift of the AD curve will result in

Correct AnswerverifiedB

FIGURE 23-5 Refer to Figure 23-5.Suppose that an increase in autonomous investment caused the AD curve to shift to the right,as shown.If the simple multiplier in this model is 5,then what is the value of the multiplier?

Correct AnswerverifiedShow Answer

Consider the following news headline: "Governments plan massive hospital construction programs across the country." Choose the statement below that best describes the likely macroeconomic effects.

Correct AnswerverifiedShow Answer

In the short run,the aggregate supply curve has a positive slope because,as the price level rises,producers can

Correct AnswerverifiedShow Answer

Consider the AD/AS model.Suppose there is a decrease in aggregate demand and,simultaneously,an increase in aggregate supply.The result will be a

Correct AnswerverifiedShow Answer

Which of the following events would cause the AE function to shift upwards in a parallel way?

Correct AnswerverifiedShow Answer

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D

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Consider a simple macro-model with demand-determined output.An exogenous increase in the domestic price level will the real value of the private sector's wealth,which leads to in autonomous consumption and thus shift in the AE function.

Correct Answer
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C

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B

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