A) The price level will decrease but the nominal wage will increase.

B) The price level will increase but the nominal wage will decrease.
C) Both the price level and the nominal wage will decrease.
D) Both the price level and the nominal wage will increase.

118.3) Refer to the above graph to answer this question. To close the gap, aggregate
demand would have to:

A) Remain the same.

B) Increase.
C) Decrease.
D) Become a vertical line.

118.4) Refer to the above graph to answer this question. Assuming the economy is in
equilibrium, what kind of gap exists?

A) Consumer goods gap.

B) Recessionary gap.
C) Inflationary gap.
D) Capital goods gap.

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119) Assume that the present price level is P1.

119.1) Refer to Graph A to answer this question. Assuming the economy is in

equilibrium, to close the gap aggregate demand would have to:

A) Remain the same.

B) Increase.
C) Decrease.
D) Become a vertical line.

119.2) Refer to Graph B to answer this question. Assuming the economy is in

equilibrium, to close the gap, aggregate demand would have to:

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 A) Remain the same.
B) Increase.
C) Decrease.
D) Become a vertical line.

119.3) Refer to the above graph to answer this question. Which graph illustrates full-
employment equilibrium?

A) A
B) B
C) C
D) D

119.4) Refer to the above graph to answer this question. Which graph illustrates a
recessionary gap?

A) A
B) B
C) C
D) D

119.5) Refer to the above graph to answer this question. Which graph illustrates an
inflationary gap?

A) A
B) B
C) C
D) D

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 119.6) Refer to the above graph to answer this question. Which graph illustrates a surplus
of goods and services?

A) A
B) B
C) C
D) D

120)

120.1) Refer to the above graph to answer this question. What could cause the movement
from point A to point B?

A) A decrease in labour costs.

B) A decrease in labour productivity.
C) A decrease in the interest rate.
D) An increase in productivity.
E) A decrease in government spending.

120.2) Refer to the above graph to answer this question. What could cause the movement
from point B to point A?

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 A) A decrease in government spending.
B) A decrease in labour productivity.
C) The discovery of new oil fields.
D) An increase in wage rates.

121) The following are an aggregate demand and supply schedules for a hypothetical
economy. All figures in $ billions.
Aggregate Quantity Demanded Price Index Aggregate Quantity Supplied
1200 120 900
1100 130 950
1000 140 1000
900 150 1050
800 160 1100

121.1) Refer to the information above to answer this question. Assuming the economy is
in equilibrium, and potential GDP equaled 1200, what kind of gap exists?

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

121.2) Refer to the information above to answer this question. Assuming the economy is
in equilibrium, and potential GDP equaled 800, what kind of gap exists?

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

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