Question 1

What does real GDP measure?

Accepted Answer

A)  the dollar value of all goods 
B)  economic activity and income 
C)  primarily long-run trends 
D)  profitability of all companies in the economy 
A)  the dollar value of all goods 
B)  economic activity and income 
C)  primarily long-run trends 
D)  profitability of all companies in the economy

Question 2

Discuss what economists believe is different about the long and short run.

Accepted Answer

Most economists believe that in the long

Question 3

Make a list of things that would shift the aggregate-demand curve to the right.

Accepted Answer

Examples (and variations on examples) in

Question 4

What was the main reason for the economic boom of the early 1940s?

Accepted Answer

A)  increased government expenditures 
B)  falling prices of oil and other natural resources 
C)  an increase in the immigration of skilled workers 
D)  rapid developments in transportation, electronics, and communication 
A)  increased government expenditures 
B)  falling prices of oil and other natural resources 
C)  an increase in the immigration of skilled workers 
D)  rapid developments in transportation, electronics, and communication

Question 5

All explanations for the upward slope of the short-run aggregate-supply curve suppose that output supplied increases when the price level increases more than expected.

Accepted Answer

A) True 
 B)False

Question 6

According to the misperceptions theory of the short-run aggregate supply curve, if the price level increases less than people expect, how do firms change their behaviour?

Accepted Answer

A)  They believe that the relative price has decreased, so they increase production. 
B)  They believe that the relative price has decreased, so they decrease production. 
C)  They believe that the relative price has increased, so they increase production. 
D)  They believe that the relative price has increased, so they decrease production. 
A)  They believe that the relative price has decreased, so they increase production. 
B)  They believe that the relative price has decreased, so they decrease production. 
C)  They believe that the relative price has increased, so they increase production. 
D)  They believe that the relative price has increased, so they decrease production.

Question 7

What would cause prices to fall and output to rise in the short run?

Accepted Answer

A)  short-run aggregate supply shifts right 
B)  short-run aggregate supply shifts left 
C)  aggregate demand shifts right 
D)  aggregate demand shifts left 
A)  short-run aggregate supply shifts right 
B)  short-run aggregate supply shifts left 
C)  aggregate demand shifts right 
D)  aggregate demand shifts left

Question 8

What has NOT been suggested as a cause of the Great Depression?

Accepted Answer

A)  rapidly rising asset prices 
B)  a decline in Canadian exports 
C)  a decrease in stock prices 
D)  the collapse of the banking system 
A)  rapidly rising asset prices 
B)  a decline in Canadian exports 
C)  a decrease in stock prices 
D)  the collapse of the banking system

Question 9

What is classical dichotomy?

Accepted Answer

A)  It is the separation of variables that move with the business cycle and variables that do not. 
B)  It is the separation of changes in money and changes in government expenditures. 
C)  It is the separation of endogenous and exogenous variables. 
D)  It is the separation of real and nominal variables. 
A)  It is the separation of variables that move with the business cycle and variables that do not. 
B)  It is the separation of changes in money and changes in government expenditures. 
C)  It is the separation of endogenous and exogenous variables. 
D)  It is the separation of real and nominal variables.

Question 10

A decrease in the price level makes consumers feel wealthier, so they purchase more. This logic helps explain why the aggregate demand curve slopes downward.

Accepted Answer

A) True 
 B)False

Question 11

When output rises, unemployment falls.

Accepted Answer

A) True 
 B)False

Question 12

According to the classical view in economics, which variable or policy can influence economic growth in the long run?

Accepted Answer

A)  an increase in capital stock 
B)  an increase in money supply 
C)  an increase in unemployment benefits 
D)  an increase in nominal interest rates 
A)  an increase in capital stock 
B)  an increase in money supply 
C)  an increase in unemployment benefits 
D)  an increase in nominal interest rates

Question 13

What were the changes in output in the early 1930s and early 1940s in Canada, respectively?

Accepted Answer

A)  a large increase and a large increase 
B)  a large increase and a large decrease 
C)  a large decrease and a large increase 
D)  a large decrease and a large decrease 
A)  a large increase and a large increase 
B)  a large increase and a large decrease 
C)  a large decrease and a large increase 
D)  a large decrease and a large decrease

Question 14

What does the downward slope of the aggregate-demand curve show?

Accepted Answer

A)  that an increase in the money supply causes the aggregate quantity of goods and services demanded to increase 
B)  that an increase in the money supply causes the aggregate quantity of goods and services demanded to decrease 
C)  that an increase in the price level causes the aggregate quantity of goods and services demanded to increase 
D)  that an increase in the price level causes the aggregate quantity of goods and services demanded to decrease 
A)  that an increase in the money supply causes the aggregate quantity of goods and services demanded to increase 
B)  that an increase in the money supply causes the aggregate quantity of goods and services demanded to decrease 
C)  that an increase in the price level causes the aggregate quantity of goods and services demanded to increase 
D)  that an increase in the price level causes the aggregate quantity of goods and services demanded to decrease

Question 15

Changes in the price level affect which component of aggregate demand?

Accepted Answer

A)  only consumption and investment 
B)  only consumption and net exports 
C)  only consumption 
D)  consumption, investment, and net exports 
A)  only consumption and investment 
B)  only consumption and net exports 
C)  only consumption 
D)  consumption, investment, and net exports

Question 16

According to the sticky-wage theory, which statement is consistent with an unexpected increase in the price level?

Accepted Answer

A)  The real wage rises, and employment rises. 
B)  The real wage rises, and employment falls. 
C)  The real wage falls, and employment rises. 
D)  The real wage falls, and employment falls. 
A)  The real wage rises, and employment rises. 
B)  The real wage rises, and employment falls. 
C)  The real wage falls, and employment rises. 
D)  The real wage falls, and employment falls.

Question 17

What has been suggested as a reason for the severity of the Great Depression?

Accepted Answer

A)  a decline in output 
B)  a decrease in prices 
C)  a large increase in the money supply 
D)  the lack of a central bank in Canada 
A)  a decline in output 
B)  a decrease in prices 
C)  a large increase in the money supply 
D)  the lack of a central bank in Canada

Question 18

Figure 14-1  
-Refer to Figure 14-1. How would an increase in the money supply move the economy in the long run?

Accepted Answer

A)  from C to A 
B)  from C to B 
C)  from C to A to C again 
D)  from C to D 
A)  from C to A 
B)  from C to B 
C)  from C to A to C again 
D)  from C to D

Question 19

Which of the following shifts aggregate demand to the right?

Accepted Answer

A)  a decrease in the money supply 
B)  The Bank of Canada buys bonds in the open market 
C)  the repeal of an investment tax credit 
D)  a decrease in the price level 
A)  a decrease in the money supply 
B)  The Bank of Canada buys bonds in the open market 
C)  the repeal of an investment tax credit 
D)  a decrease in the price level

Question 20

On average, over the past 150 years, at about what rate has the Canadian economy grown?

Accepted Answer

A)  1 percent per year 
B)  2 percent per year 
C)  5 percent per year 
D)  7 percent per year 
A)  1 percent per year 
B)  2 percent per year 
C)  5 percent per year 
D)  7 percent per year

What does real GDP measure?

Discuss what economists believe is different about the long and short run.

Make a list of things that would shift the aggregate-demand curve to the right.

What was the main reason for the economic boom of the early 1940s?

All explanations for the upward slope of the short-run aggregate-supply curve suppose that output supplied increases when the price level increases more than expected.

According to the misperceptions theory of the short-run aggregate supply curve, if the price level increases less than people expect, how do firms change their behaviour?

What would cause prices to fall and output to rise in the short run?

What has NOT been suggested as a cause of the Great Depression?

What is classical dichotomy?

A decrease in the price level makes consumers feel wealthier, so they purchase more. This logic helps explain why the aggregate demand curve slopes downward.

When output rises, unemployment falls.

According to the classical view in economics, which variable or policy can influence economic growth in the long run?

What were the changes in output in the early 1930s and early 1940s in Canada, respectively?

What does the downward slope of the aggregate-demand curve show?

Changes in the price level affect which component of aggregate demand?

According to the sticky-wage theory, which statement is consistent with an unexpected increase in the price level?

What has been suggested as a reason for the severity of the Great Depression?

Figure 14-1 -Refer to Figure 14-1. How would an increase in the money supply move the economy in the long run?

Which of the following shifts aggregate demand to the right?

On average, over the past 150 years, at about what rate has the Canadian economy grown?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Small Open Economy

The Influence of Monetary Policy on Aggregate Demand

The Influence of Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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Exam 14: Aggregate Demand and Aggregate Supply

What does real GDP measure?

Discuss what economists believe is different about the long and short run.

Make a list of things that would shift the aggregate-demand curve to the right.

What was the main reason for the economic boom of the early 1940s?

All explanations for the upward slope of the short-run aggregate-supply curve suppose that output supplied increases when the price level increases more than expected.

According to the misperceptions theory of the short-run aggregate supply curve, if the price level increases less than people expect, how do firms change their behaviour?

What would cause prices to fall and output to rise in the short run?

What has NOT been suggested as a cause of the Great Depression?

What is classical dichotomy?

A decrease in the price level makes consumers feel wealthier, so they purchase more. This logic helps explain why the aggregate demand curve slopes downward.

When output rises, unemployment falls.

According to the classical view in economics, which variable or policy can influence economic growth in the long run?

What were the changes in output in the early 1930s and early 1940s in Canada, respectively?

What does the downward slope of the aggregate-demand curve show?

Changes in the price level affect which component of aggregate demand?

According to the sticky-wage theory, which statement is consistent with an unexpected increase in the price level?

What has been suggested as a reason for the severity of the Great Depression?

Figure 14-1 -Refer to Figure 14-1. How would an increase in the money supply move the economy in the long run?

Which of the following shifts aggregate demand to the right?

On average, over the past 150 years, at about what rate has the Canadian economy grown?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Small Open Economy

The Influence of Monetary Policy on Aggregate Demand

The Influence of Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

Filters