121.3) Refer to the information above to answer this question.

What is the equilibrium

level of output?

A) 800.
B) 900.
C) 1,000.
D) 1,100.
E) 1,050.

121.4) Refer to the information above to answer this question. Assuming the economy is
in equilibrium, and potential GDP equaled 1000, what kind of gap exists?

A) No gap exists.
B) An income tax gap.
C) A recessionary gap.
D) An inflationary gap.

121.5) Refer to the information above to answer this question. What are the implications
if the price level is 120?

A) The price level is above equilibrium.

B) There is a shortage of real output of 300.
C) There is a surplus of real output of 300.
D) There is a surplus of real output of 150.

121.6) Refer to the information above to answer this question. If the aggregate quantity
demanded falls by 150, what will be the equilibrium price level and real output
respectively?

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 A) $120 and 900.
B) $130 and 950.
C) $140 and 950.
D) $150 and 1,050.
E) $160 and 1,050.

121.7) Refer to the information above to answer this question. At what level of real
output will full employment occur?

A) 900.
B) 950.
C) 1,000.
D) 1,100.
E) It cannot be determined.

122) The following are aggregate demand and supply schedules for a hypothetical economy.
All figures are in $ billions.
Aggregate Quantity Demanded Price Index Aggregate Quantity Supplied
3500 120 2360
3400 130 2400
3300 140 2480
3200 150 2600
3100 160 2760
3000 170 3000
2900 180 3260
2800 190 3600

Note: Potential GDP is 3,000.

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 122.1) Refer to the information above to answer this question. What will equilibrium
price level and GDP be?

A) 150 and 2,600

B) 150 and 3,000
C) 170 and 3,600
D) 170 and 3,000

122.2) Refer to the information above to answer this question. Assume that technological
change increases aggregate supply by 340. What will the equilibrium price and quantity
be?

A) 160 and 3,100.

B) 160 and 3,440.
C) 170 and 3,440.
D) 140 and 2,760.
E) 140 and 2,820.

122.3) Refer to the information above to answer this question. Assume that technological
change increases aggregate supply by 340. What would be the result?

A) A new full employment level of Real GDP of 3,340 and lower prices.
B) An inflationary gap of 340.
C) A recessionary gap of 240.
D) A new equilibrium of Real GDP of some indeterminate level depending on how much
prices fell.
E) A new full-employment level of Real GDP of 3,340 with no change in prices.

122.4) Refer to the information above to answer this question. Assume that reduced
investment spending lowers aggregate demand by 600. What would the new equilibrium
price level and Real GDP be?

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 A) 170 and 2,400.
B) 130 and 2,400.
C) 130 and 3,000.
D) 150 and 2,600.

123) Answer the question(s) on the basis of the following table:

Effect on AS: Effect on LAS:
Increase Increase
Decrease Decrease
No change No change

123.1) Refer to the above information to answer this question. What will happen if
resource prices increase?

A) 1 and A
B) 2 and B
C) 2 and C
D) 3 and B

123.2) Refer to the above information to answer this question. What will happen if the
labour participation rate increases?

A) 1 and A
B) 2 and B
C) 2 and C
D) 3 and A

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 123.3) Refer to the above information to answer this question. What will happen if there
is a decrease in productivity?

A) 1 and A
B) 2 and B
C) 2 and C
D) 3 and A

124) The following is a list of economic events:

1. A big cut in the price of imported oil.
2. An increase in the money supply.
3. An increase in labour productivity.
4. A decline in the GDP of the USA
5. A big rise in nominal wages.

124.1) Refer to the information above to answer this question. Which of the listed
economic events will cause an increase in aggregate demand?

A) 1 only.
B) 2 only.
C) 1 and 2.
D) 1, 2 and 5.

124.2) Refer to the information above to answer this question. Which of the listed
economic events will cause an increase in both the aggregate supply and in the LAS curve?

A) 1 only
B) 2 only
C) 3 only
D) 5 only

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