157) The following table shows the aggregate demand and aggregate supply schedules for the

economy of Queen's Island

Aggregate Quantity Demanded Price Index Aggregate Quantity Supplied
$2000 80 $1100
1800 90 1200
1600 100 1300
1400 110 1400
1200 120 1500
1000 130 1600

a) What are the equilibrium values of price and Real GDP?

b) Suppose Potential GDP is $1,600. What is the output gap for Queen's Island?
c) Assume that aggregate demand shift so such that economy of Queen's Island is at full
employment. How and by how much does the aggregate demand change? What are the new
equilibrium values of price and Real GDP?
d) Assume that aggregate supply shifts so that economy of Queen's Island is at full employment.
How and by how much does the aggregate supply change? What are the new equilibrium values
of price and Real GDP?

158) What are the five determinants of investment spending?

159) List the four factors that can cause a decrease in exports?

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160) Distinguish between physical capital and human capital.

161) Distinguish the difference between a Keynesian AS curve and Neoclassical AS curve

162) Aggregate demand is the total quantity of final goods and services that consumers,
businesses, government and those living outside the country would buy at various different price
levels.

⊚ true
⊚ false

163) The foreign-trade effect is the effect that a change in exports and imports has on the price
level.

⊚ true
⊚ false

164) The aggregate supply curve is upward-sloping.

⊚ true
⊚ false

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165) Macroeconomic equilibrium occurs where the aggregate demand is equal to long-run
aggregate supply.

⊚ true
⊚ false

166) A change in resource prices will shift both the aggregate supply and the LAS curves.

⊚ true
⊚ false

167) An increase in the long-run aggregate supply has no effect on macroeconomic

equilibrium.

⊚ true
⊚ false

168) An increase in aggregate demand will cause an increase in both Real GDP and the price
level.

⊚ true
⊚ false

169) An increase in wage rates will cause an increase in both Real GDP and the price level.

⊚ true
⊚ false

170) According to Keynes, the aggregate supply curve is vertical.

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 ⊚ true
⊚ false

171) According to neoclassicists, an increase in aggregate demand will have no effect upon
Real GDP but will cause the price level to increase.

⊚ true
⊚ false

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Answer Key

Test name: Chap 05_10ce_Macro

1) B
2) D
3) A
4) C
5) B
6) D
7) C
8) D
9) A
10) B
11) A
12) C
13) B
14) A
15) B
16) C
17) B
18) B
19) B
20) D
21) D
22) C
23) C
24) B
25) D
26) C

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