fall.2008.econ1012.mt3

fall.2008.econ1012.mt3 - Economics 1012A: Introduction to...

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Page 1 Economics 1012A: Introduction to Macroeconomics Fall 2008 Dr. R. E. Mueller Third Midterm Examination November 19, 2008 Answer all of the following questions by selecting the most appropriate answer on your bubble sheet. Be sure to read each question carefully. Each question is worth 2 points (100 points total) and will count as 20 per cent of your final course grade. Calculators and other electronic devices are prohibited. 1. If aggregate demand is less than potential output, eventually the short-run aggregate supply curve will shift A) left and eliminate the recessionary gap. B) right and eliminate the recessionary gap. C) left and eliminate the inflationary gap. D) right and eliminate the inflationary gap. 2. At the intersection of the short-run aggregate supply and aggregate demand curves, the economy is in A) short-run equilibrium but not necessarily long-run equilibrium. B) long-run equilibrium but not necessarily short-run equilibrium. C) both short-run and a long-run equilibrium. D) neither short-run nor long-run equilibrium. 3. A recessionary gap exists when A) aggregate demand exceeds short-run aggregate supply. B) aggregate demand exceeds potential output. C) short-run aggregate supply exceeds aggregate demand. D) potential output exceeds aggregate demand. 4. If firms interpret a higher-than-expected price level as a signal of an increase in the demand for their product, then the short-run aggregate supply curve will tend to A) have a negative slope. B) have a positive slope. C) be vertical. D) be horizontal. 5. A fall in the Canadian price level will cause A) both exports and imports to increase. B) both exports and imports to decrease. C) exports to increase and imports to decrease. D) exports to decrease and imports to increase.
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Page 2 6. If the multiplier effect did not exist, the aggregate demand curve would A) become steeper. B) become flatter. C) be horizontal. D) not exist. Use the following to answer question 7: 7. Refer to the graph above. In the graph, if the price level is P 0 and the aggregate demand curve is AD 0, then the economy is in A) a recessionary gap. B) an inflationary gap. C) long-run equilibrium. D) short-run equilibrium but not a long-run equilibrium. 8. The new government of Pakistan transfers money from the rich to the poor. This should A) shift the Pakistani AD curve to the left. B) shift the Pakistani AD curve to the right. C) make the Pakistani AD curve flatter. D) make the Pakistani AD curve steeper. 9. Policy making is A) always difficult. B) most difficult in the Classical range. C) most difficult in the Keynesian range. D) most difficult in the intermediate range.
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Page 3 Use the following to answer question 10: Real income Real expenditures AE1 AP AE0 800 900 E0 E1 10. Refer to the graph above. A shift in the aggregate expenditure curve from AE0 to AE1 could be caused by A) an increase in income taxes.
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fall.2008.econ1012.mt3 - Economics 1012A: Introduction to...

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