Student name:__________

1) What is Potential GDP?

A) The total amount of production an economy produces at equilibrium.

B) The total amount of production when all of an economy's resources are being fully
utilized.
C) A prediction of what an economy will likely produce in the future.
D) The total amount of production by an economy, adjusted for inflation.

2) Which of the following has the same meaning as LAS?

A) Minimum efficient scale.

B) Economic capacity.
C) Unemployment GDP
D) Potential GDP.

3) All of the following, except one, refer to the total amount of production when all of an
economy's resources are being fully utilized. Which is the exception?

A) Equilibrium GDP.
B) Full-employment GDP.
C) Potential GDP.
D) Economic capacity.

4) What is the slope of the LAS curve?

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 A) Horizontal.
B) Upward-sloping.
C) Vertical.
D) Downward-sloping.
E) It is the same slope as the SAS curve.

5) What does the LAS curve reflect?

A) The effect of a change in the price level.

B) A constant real wage level.
C) Various levels of employment.
D) Less than capacity output.

6) Which of the following statements is true about Canada's annual rate of economic growth
since 2000?

A) It was positive in every year.

B) There were more negative than positive years.
C) It was 5% or above in most years.
D) It averaged 2.3 percent.

7) All of the following, except one, are sources of economic growth. Which is the
exception?

A) The amount and quality of natural resources available.

B) The amount of human capital available.
C) High interest rates.
D) The amount of capital stock available.
E) It reflects the amount of resources devoted to research and development.

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8) All of the following, except, one is a correct statement about labour productivity. Which
is the exception?

A) It depends on physical capital.

B) It depends on human capital.
C) It is an integral part of what is considered labour quality.
D) It is the basis for measuring economic growth.
E) It reflects the amount of resources devoted to research and development.

9) What is the business cycle?

A) The expansionary and contractionary phases in the growth rate of Real GDP.
B) The expansionary and contractionary phases in the rate of unemployment.
C) The continuous rise in GDP that Canada has experienced throughout the Twentieth
Century.
D) The rise and fall in the rate of inflation.

10) What does it mean to say that the economy is in a contractionary phase of the business
cycle?

A) That Real GDP is declining.

B) That the rate of growth of Real GDP is falling.
C) That Real GDP is increasing
D) That the rate of growth of Real GDP is positive.
E) That inflation is declining.

11) All of the following, except one, are possible causes of the business cycle. Which is the
exception?

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 A) An increase in the economic growth rate.
B) A change in government spending.
C) A change in interest rates.
D) A change in the foreign demand for Canadian products.
E) A significant technological breakthrough.

12) What is aggregate supply?

A) The aggregate quantity produced by all sellers at equilibrium.

B) The aggregate quantity produced by all sellers at full employment.
C) The aggregate quantity produced by all sellers at various different prices.
D) The aggregate quantity produced by all sellers at the current price level.

13) "The aggregate quantity of goods and services produced by all sellers at various prices".
Of what is this a definition?

A) Aggregate expenditure.
B) Aggregate supply.
C) Aggregate demand.
D) Potential GDP.

14) What is true of a movement up the aggregate supply curve?

A) The nominal wage remains constant but the real wage declines.
B) The real wage remains constant but the nominal wage declines.
C) The real wage remains constant but the nominal wage increases.
D) Both the nominal and real wages decline.

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15) Why is the AS curve upward-sloping?

A) Because, since nominal wages increase when production rises, then so too must the
price level.
B) A higher price means higher total profits and therefore firms will produce more.
C) Higher prices mean higher real wages and therefore firms must produce more to in
order to maintain profit levels.
D) Higher prices increase the demand and therefore the quantity supplied must also
increase.

16) Since the AS curve is upward sloping, as production increases, all of the following are
true except:

A) productivity is likely to fall.

B) the firm will be forced to use less suitable resources.
C) the price of resources increases
D) the cost of production to rise.

17) What is the slope of the AS curve?

A) Horizontal.
B) Upward-sloping.
C) Vertical.
D) Downward-sloping.
E) The same slope as the LAS curve.

18) At low levels of Real GDP, what is the result of a decrease in aggregate demand?

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