Question 1

A technological advance shifts
A)both SAS and AD rightward.
B)both SAS and LAS leftward.
C)SAS rightward but leaves LAS unchanged.
D)LAS rightward but leaves SAS unchanged.
E)both SAS and LAS rightward.

Accepted Answer

E

Question 2

Complete the following sentence.Potential GDP
A)increases as the price level rises.
B)is the level of real GDP when unemployment is zero.
C)increases as the quantity of money in the economy increases.
D)does not vary with the price level.
E)never changes.

Accepted Answer

Potential GDP is the level of real GDP that an economy can produce at full employment and does not vary with the price level.

Question 3

Which one of the following newspaper quotations describes a leftward shift of the LAS curve?
A)"The decrease in consumer spending may lead to a recession."
B)"The increase in consumer spending is expected to lead to inflation, without any increase in real GDP."
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 recent tornadoes destroyed many factories in Calgary and Edmonton."

Accepted Answer

E

Question 4

An increase in oil prices to a country that is a net importer of oil shifts
A)both the short-run aggregate supply and long-run aggregate supply curves rightward.
B)both the short-run aggregate supply and long-run aggregate supply curves leftward.
C)the short-run aggregate supply curve leftward, but leaves the long-run aggregate supply curve unchanged.
D)the long-run aggregate supply curve rightward, but leaves the short-run aggregate supply curve unchanged.
E)the short-run aggregate supply curve leftward, but shifts the long-run aggregate supply curve rightward.

Accepted Answer

An increase in oil prices would increase production costs for firms, leading to a decrease in short-run aggregate supply. However, firms will eventually adjust and find substitutes, leading to no change in the long-run aggregate supply. Therefore, the short-run aggregate supply curve will shift leftward, but the long-run aggregate supply curve will remain unchanged.

Question 5

Potential GDP is the level of real GDP at which
A)aggregate demand equals short-run aggregate supply.
B)there is full employment.
C)there is a recessionary gap.
D)there is over-full employment.
E)prices are sure to rise.

Accepted Answer

Potential GDP is the level of real GDP that can be produced when all resources are used efficiently and there is full employment, meaning all available labor is being utilized.

Question 6

A vertical long-run aggregate supply curve indicates that
A)an increase in the price level will not expand an economy's output in the long run.
B)output rates greater than the long-run output rate are unattainable.
C)an increase in the price level will permit the economy to achieve a higher level of output.
D)an increase in the price level will increase technological change and economic growth.
E)the long-run aggregate supply curve never shifts.

Accepted Answer

A vertical long-run aggregate supply curve indicates that an increase in the price level will not expand an economy's output in the long run. This suggests that the economy has reached its full potential output level and any increase in demand will only lead to higher prices, not increased output.

Question 7

The short-run aggregate supply curve is the relationship between the quantity of real GDP supplied and
A)the quantity of real GDP demanded.
B)real income.
C)the inflation rate.
D)the real interest rate.
E)the price level.

Accepted Answer

The short-run aggregate supply curve shows the relationship between the quantity of real GDP supplied and the price level. As the price level increases, firms are willing to supply more output in the short run, as they can earn more revenue and profits. Conversely, as the price level decreases, firms will decrease their output in the short run, as their revenue and profits will decrease. Therefore, the correct answer is E, the price level.

Question 8

Which one of the following newspaper quotations describes a shift of only the SAS curve?
A)"The decrease in consumer spending may lead to a recession."
B)"The increase in consumer spending is expected to lead to inflation, without any increase in real GDP."
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 recent tornadoes destroyed many factories in Calgary and Edmonton."

Accepted Answer

The answer of Which one of the following newspaper quotations...

Question 9

Use the figure below to answer the following questions.
  
Figure 26.1.1
-Refer to Figure 26.1.1.Which graph illustrates what happens when factor prices rise?
A)(a)
B)(b)
C)(c)
D)(d)
E)(a)and (b)

Accepted Answer

Graph (b) illustrates what happens when factor prices rise. As factor prices increase, the cost of production increases, causing a leftward shift of the supply curve. This results in a higher equilibrium price and lower equilibrium quantity exchanged in the market. Graph (a) shows a shift in the demand curve, which is not directly related to factor prices. Graphs (c) and (d) show shifts in both supply and demand curves, which may or may not be related to factor prices. Therefore, the best choice is (b) only.

Question 10

Which one of the following newspaper quotations describes a movement along an LAS curve?
A)"The decrease in consumer spending may lead to a recession."
B)"The increase in consumer spending is expected to lead to inflation, without any increase in real GDP."
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 labour force."
E)"The recent tornadoes destroyed many factories in Calgary and Edmonton."

Accepted Answer

An LAS curve represents the relationship between inflation and real GDP. An increase in consumer spending without any increase in real GDP (as stated in choice B) would lead to inflation and movement along the LAS curve to a higher price level.

Question 11

If the money wage rate falls,then
A)the AD curve shifts rightward.
B)firms hire less labour.
C)the LAS curve shifts rightward.
D)the SAS curve shifts rightward.
E)C and D.

Accepted Answer

The answer of If the money wage rate falls,then
A)the AD...

Question 12

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

Accepted Answer

The long-run aggregate supply curve is vertical because potential GDP is independent of the price level. This means that no matter what the price level is, the maximum amount of output an economy can produce is determined by its capacity, resources, and technology. In the long-run, the economy adjusts to reach its potential GDP, which is represented by a vertical long-run aggregate supply curve.

Question 13

Which one of the following newspaper quotations describes a rightward shift of the LAS curve?
A)"The decrease in consumer spending may lead to a recession."
B)"The increase in consumer spending is expected to lead to inflation, without any increase in real GDP."
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 recent tornadoes destroyed many factories in Calgary and Edmonton."

Accepted Answer

The answer of Which one of the following newspaper quotations...

Question 14

The long-run aggregate supply curve is
A)vertical.
B)negatively sloped.
C)positively sloped but extremely steep.
D)almost flat.
E)positively sloped at low levels of real GDP and vertical at high levels of real GDP.

Accepted Answer

The long-run aggregate supply curve is vertical because in the long run, all factors of production can be adjusted, including capital, labor, and technology, which means that the economy can produce at its full potential output level regardless of the price level.

Question 15

The short-run aggregate supply curve indicates
A)the relationship between the price level and real GDP demanded by consumers, investors, governments, and net exporters.
B)the relationship between the price level and the natural unemployment rate.
C)the relationship between the purchasing power of wages and the quantity of labour supplied by households.
D)the relationship between the quantity of real GDP supplied and the price level when the money wage rate, the prices of other resources, and potential GDP remain constant.
E)the various quantities of real GDP producers supply at different income levels.

Accepted Answer

The short-run aggregate supply curve illustrates the relationship between the price level and the quantity of real GDP supplied by firms when the prices of resources are fixed and constant. It assumes that potential GDP remains constant, and changes in the price level affect only the quantity of goods and services produced in the short run.

Question 16

Which of the following does not change short-run aggregate supply?
A)a change in the money wage rate
B)technological change
C)a change in the full-employment quantity of labour
D)an increase in the quantity of capital
E)a change in expected future profits

Accepted Answer

The answer of Which of the following does not change...

Question 17

Use the figure below to answer the following questions.
  
Figure 26.1.1
-Refer to Figure 26.1.1.Which graph illustrates what happens when factor prices decrease?
A)(a)
B)(b)
C)(c)
D)(d)
E)(a)and (b)

Accepted Answer

Graph (a) illustrates what happens when factor prices decrease. As the cost of inputs decreases, the production possibilities frontier (PPF) will shift outwards, allowing for a greater output of goods and services. This is shown by the movement from PPF1 to PPF2.

Question 18

Suppose there is an increase in the quantity of capital.As a result,the SAS
A)and the LAS curves both shift leftward.
B)and the LAS curves both shift rightward.
C)curve does not shift but the LAS curve shifts rightward.
D)curve does not shift but the LAS curve shifts leftward.
E)shifts rightward, but the LAS curve does not shift.

Accepted Answer

The answer of Suppose there is an increase in the...

Question 19

Everything else remaining the same,the short-run aggregate supply curve shifts rightward if
A)the money wage rate increases.
B)aggregate demand increases.
C)the full-employment quantity of labour increases.
D)factor prices increase.
E)the quantity of capital decreases.

Accepted Answer

An increase in the full-employment quantity of labor means that there are more workers available to produce goods and services at every price level. This leads to lower production costs and an increase in the short-run aggregate supply curve.

Question 20

Which one,if any,of the following events shift the short-run aggregate supply curve but not the long-run aggregate supply curve?
A)A change in factor prices.
B)A change in the quantity of capital.
C)An advance in technology.
D)An increase in the full-employment quantity of labour.
E)None of the above.

Accepted Answer

A change in factor prices, such as an increase in wages, would shift the short-run aggregate supply curve as firms adjust their production levels in response to the increased cost of production. However, in the long-run, firms can adjust their capital and technology to offset the rise in factor prices, resulting in no shift in the long-run aggregate supply curve. The other choices would shift both the short-run and long-run aggregate supply curves.

Quiz 26: Aggregate Supply and Aggregate Demand

A technological advance shifts

Complete the following sentence.Potential GDP

Which one of the following newspaper quotations describes a leftward shift of the LAS curve?

An increase in oil prices to a country that is a net importer of oil shifts

Potential GDP is the level of real GDP at which

A vertical long-run aggregate supply curve indicates that

The short-run aggregate supply curve is the relationship between the quantity of real GDP supplied and

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

Use the figure below to answer the following questions. Figure 26.1.1 -Refer to Figure 26.1.1.Which graph illustrates what happens when factor prices rise?

Which one of the following newspaper quotations describes a movement along an LAS curve?

If the money wage rate falls,then

The long-run aggregate supply curve is vertical because

Which one of the following newspaper quotations describes a rightward shift of the LAS curve?

The long-run aggregate supply curve is

The short-run aggregate supply curve indicates

Which of the following does not change short-run aggregate supply?

Use the figure below to answer the following questions. Figure 26.1.1 -Refer to Figure 26.1.1.Which graph illustrates what happens when factor prices decrease?

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

Everything else remaining the same,the short-run aggregate supply curve shifts rightward if

Which one,if any,of the following events shift the short-run aggregate supply curve but not the long-run aggregate supply curve?