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ECON-1012-B-Introduction to Macroeconomics

ECON-1012-B-Introduction to Macroeconomics

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The quantity of real GDP demanded is the sum of real consumption expenditure (C) and investment (I), plus which of the following variables?

government expenditure (G), and exports (X) minus imports (M)

government expenditure (G)

government expenditure (G), exports (X), and imports (M)

exports (X) minus imports (M)

exports (X) and imports (M)

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If real GDP is greater than potential GDP, which of the following events would we expect to occur as the economy moves towards full employment?

We expect the money wage rate to fall.

We expect the money wage rate to rise.

We expect aggregate demand to decrease.

We expect potential GDP to increase.

We expect potential GDP to decrease.

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Which of the following statements about the AE curve and the AD curve is correct?

They are linked because if the price level rises, the AE shifts downward, and the economy moves up along the AD curve.

They are linked because if the price level rises, the AE curve shifts downward, and the economy moves down along the AD curve.

They are the same curve, just with different names.

They are linked because if the price level rises, the AE curve shifts downward, and the AD curve shifts leftward.

They are not related at all.

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Short Description: A line graph of price level versus real G D P. Long Description: The vertical axis is labelled, price level (G D P deflator, 20 12 = 100) and ranges from 60 to 110 in increments of 10 with a kink near the origin. The horizontal axis is labelled, real G D P (billions of 20 12 dollars) and ranges from 450 to 700 in increments of 50 with a kink near the origin. The line for S A S is a concave up curve that slopes upward from the lower left corner to the upper right corner passing through the points (475, 60), (550, 70), and (600, 80). The line for A D slopes downward from the upper left corner to the lower right corner, passing through the points (550, 90), (600, 80), and (650, 70). The line for L A S is a vertical line from the point (550, 0) on the horizontal axis passing through the points (550, 70) and (550, 90).

Refer to Figure 10.3.2, which shows the AS-AD model, in which an economy is in short-run macroeconomic equilibrium. If the economy automatically adjusts to long-run equilibrium, which of the following situations occur?

Potential GDP decreases.

The SAS curve shifts rightward.

The actual unemployment rate exceeds the natural unemployment rate.

The price level rises to 90.

Real GDP is $600 billion.

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Short Description: A set of four graph of price level versus real G D P. Long Description: The vertical axis of each graph is labelled, price level and the horizontal axis is labelled, real G D P. The graph are as follows.(a) The line for S A S0 slopes upward from the lower left corner to the upper right corner. The line for S A S1 slopes upward from the lower left corner to the upper right corner parallel to the line for S A S0 on the bottom. The line for A D0 slopes downward from the upper left corner to the lower right corner, intersecting the lines for S A S0 and S A S1.(b) The line for S A S0 slopes upward from the lower left corner to the upper right corner. The line for S A S1 slopes upward from the lower left corner to the upper right corner parallel to the line for S A S0 on the top. The line for A D0 slopes downward from the upper left corner to the lower right corner, intersecting the lines for S A S0 and S A S1.(c) The line for A D0 slopes down from the upper left corner to the lower right corner. The line for A D1 slopes downward from the upper left corner to the lower right corner parallel to the line for A D0 on the right. The line for S A S0 slopes upward from the lower left corner to the upper right corner, intersecting the lines for A D0 and A D1.(d) The line for A D0 slopes down from the upper left corner to the lower right corner. The line for A D1 slopes downward from the upper left corner to the lower right corner parallel to the line for A D0 on the right. The line for S A S0 slopes upward from the lower left corner to the upper right corner, intersecting the lines for A D0 and A D1.

Refer to Figure 10.2.1, which shows possible changes in aggregate supply and aggregate demand. Which graph illustrates the effect of a decrease in government expenditure?

both graphs (a) and (d)

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How does an increase in the money wage rate influence aggregate supply?

Both the SAS curve and the LAS curve leftward by the same amount.

The SAS curve shifts rightward, but the LAS curve does not shift.

The SAS curve shifts leftward, but the LAS curve does not shift.

The LAS curve shifts rightward, but the SAS curve does not shift.

Both the SAS curve and the LAS curve rightward by the same amount.

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Which of the following variables can change without creating a shift of the aggregate demand curve?

monetary policy

the interest rate

the price level

expectations about inflation

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

The AD curve shifts leftward and the SAS curve shifts rightward.

The AD curve shifts rightward and the SAS curve remains unchanged.

The AD curve shifts rightward and the SAS curve shifts leftward.

The LAS curve shifts leftward.

The SAS curve shifts leftward.

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How does a fall in the price level influence aggregate expenditure and aggregate demand?

It increases aggregate expenditure and decreases aggregate demand.

It has no effect on aggregate expenditure.

It increases aggregate expenditure, but has no effect on aggregate demand.

It increases aggregate expenditure and increases the quantity of real GDP demanded.

It increases aggregate expenditure and increases aggregate demand.

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Short Description: A line graph of price level versus real G D P. Long Description: The vertical axis is labelled, price level (G D P deflator, 20 12 = 100) and ranges from 60 to 110 in increments of 10 with a kink near the origin. The horizontal axis is labelled, real G D P (billions of 20 12 dollars) and ranges from 450 to 700 in increments of 50 with a kink near the origin. The line for S A S is a concave up curve that slopes upward from the lower left corner to the upper right corner passing through the points (475, 60), (550, 70), and (600, 80). The line for A D slopes downward from the upper left corner to the lower right corner, passing through the points (550, 90), (600, 80), and (650, 70). The line for L A S is a vertical line from the point (550, 0) on the horizontal axis passing through the points (550, 70) and (550, 90).

Refer to Figure 10.3.2, which shows the AS-AD model. When this economy is in short-run macroeconomic equilibrium, which of the following situations occurs?

Equilibrium real GDP exceeds potential GDP by $25 billion.

Equilibrium real GDP equals potential GDP.

Equilibrium real GDP exceeds potential GDP by $50 billion.

Potential GDP exceeds equilibrium real GDP by $50 billion.

Potential GDP exceeds equilibrium real GDP by $25 billion.

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