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Exam 12: Aggregate Demand and Aggregate Supply

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Question 111

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An increase in taxes will cause a(n) :

A) decrease in the quantity of real domestic output demanded.
B) increase in the quantity of real domestic output demanded.
C) decrease in aggregate demand.
D) increase in aggregate demand.

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

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Question 112

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The interest-rate and real-balances effects are important because they help explain:

A) rightward and leftward shifts of the aggregate demand curve.
B) why demand-management policy cannot be used effectively to curb stagflation.
C) the shape of the aggregate demand curve.
D) the shape of the aggregate supply curve.

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

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Question 113

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When the excess capacity of business rises,aggregate:

Differentiate between "demand-pull" and "cost-push" inflation using the aggregate demand-aggregate supply (short-run)model.

Suppose the full-employment level of real output (Q) for a hypothetical economy is $500 and that the price level (P) initially is 100.Use the following short-run aggregate supply schedules to answer the next question. -Refer to the information above.If the price level unexpectedly increases from 100 to 125,the level of real output in the short run will:

-Refer to the above diagram.If equilibrium real output is Q₂,then:

Suppose that a hypothetical economy has the following relationship between its real domestic output and the input quantities necessary for producing that level of output. (a)What is the level of productivity in this economy? (b)What is the unit cost of production if the price of each input is $2.00? (c)If the input price decreases from $2 to $1.50,what is the new per unit cost of production? What impact would this have on the short-run aggregate supply curve? (d)Suppose that instead of the input price decreasing,the productivity had increased by 25%.What will be the new unit cost of production? What impact would this change have on the short-run aggregate supply curve?

Refer to the information below.Investment spending would most likely be influenced by changes in: The following list of factors,are related to the aggregate demand curve.

Which of the factors below best explain the downward slope of aggregate demand curve? The following list of factors,are related to the aggregate demand curve.

If the current price level was such that the aggregate quantity demanded exceeded the aggregate quantity supplied,we would expect:

An increase in government spending can be expected to shift the:

The aggregate expenditures model and the aggregate demand curve can be reconciled because,other things being equal,in the aggregate expenditures model:

The real-balances effect indicates that:

The determinants of aggregate demand "determine" the location of the aggregate demand curve.Explain the four basic determinants of aggregate demand.

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:

The following table gives information about the relationship between input quantities and real domestic output in a hypothetical economy: -Suppose that the price of each input increased from $5 to $8.The per unit cost of production in the above economy would:

Other things equal,an increase in productivity will shift the aggregate supply curve rightward.

The following table gives information about the relationship between input quantities and real domestic output in a hypothetical economy: -If the price of each input is $5,the per unit cost of production in the above economy is:

-Which of the above diagrams best portrays the effects of an increase in productivity?

Suppose an economic advisor to the Prime Minister recommended a personal income tax increase.Indicate the expected effects on aggregate demand and on short-run aggregate supply.