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EC140 practice midterm
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Department
Economics
Course
EC140
Professor
Justin Smith
Semester
Winter

Description
EC140Winter 2014Midterm 2 Practice QuestionsFigure 26111 Refer to Figure 2611 Which graph illustrates what happens when factor prices risea ab bc cd de a and b2 Which one of the following newspaper quotations describes a rightward shift of the LAS curve a The increase in consumer spending is expected to lead to inflation without any increase in real GDP b Recent higher wage settlements are expected to cause higher inflation this year c Growth has been unusually high the last few years due to more women entering the work force d The decrease in consumer spending may lead to a recession e The recent tornadoes destroyed many factories in Calgary and Edmonton3 Everything else remaining the same the shortrun aggregate supply curve shifts rightward ifa the fullemployment quantity of labour increases b the quantity of capital decreases c aggregate demand increasesd the money wage rate increases e factor prices increase 4 If a change in wealth is induced by a change in the price level then this would be shown as aa movement along the aggregate demand curve due to the substitution effectsb movement along the aggregate demand curvec shift of the aggregate demand curve due to the wealth effectd shift of the aggregate demand curve due to the substitution effectse movement along the aggregate supply curve5 An economy is at full employment Which of the following events can create a recessionary gapa a decrease in the quantity of capitalb a decrease in money wages c an increase in taxesd an increase in foreign income e an increase in government spending6 In the short run firms expand their production when the price level rises becausea wages will fall allowing firms to produce at a lower cost b the higher prices allow the firm to hire more workers by offering higher wages thereby increasing productivity and profits c each firm must keep its production up to the level of its rivals and some firms will expand production as the price level increases d the money wage rate remains constant so the higher prices for their product makes it profitable for firms to expand production e none of the above
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