Question 1

In the mid-1970s the price of oil rose dramatically. What did this event cause?

Accepted Answer

A)  It shifted aggregate supply left. 
B)  It caused Canadian prices to fall. 
C)  The aggregate demand increased because of an increase in the demand for gasoline. 
D)  OPEC to increase oil production 
A)  It shifted aggregate supply left. 
B)  It caused Canadian prices to fall. 
C)  The aggregate demand increased because of an increase in the demand for gasoline. 
D)  OPEC to increase oil production

Question 2

The long-run trend in real GDP is upward. How is this possible given business cycles? What explains the upward trend?

Accepted Answer

There are occasional short-lived periods

Question 3

Keynes thought that the behaviour of the economy in the short run was influenced by what he called "animal spirits." By this he meant that businesspeople sometimes felt good about the economy, and carried out lots of investment, and at other times felt bad about the economy, and so cut back on their investment spending. Explain how such fluctuations in investment would lead to fluctuations in GDP and prices.

Accepted Answer

Fluctuations in investment cause the agg

Question 4

When taxes increase, consumption decreases. How is this situation represented in the aggregate demand and aggregate supply model?

Accepted Answer

A)  by a movement to the left along a given aggregate-demand curve 
B)  by shifting aggregate demand to the left 
C)  by shifting aggregate supply to the left 
D)  by a movement to the right along a given aggregate-demand curve 
A)  by a movement to the left along a given aggregate-demand curve 
B)  by shifting aggregate demand to the left 
C)  by shifting aggregate supply to the left 
D)  by a movement to the right along a given aggregate-demand curve

Question 5

In the aggregate demand and aggregate supply model, when does the aggregate quantity of goods demanded decrease?

Accepted Answer

A)  when real wealth increases 
B)  when the interest rate falls 
C)  when the dollar depreciates 
D)  when stock prices fall 
A)  when real wealth increases 
B)  when the interest rate falls 
C)  when the dollar depreciates 
D)  when stock prices fall

Question 6

Increased output and prices in Canada in the early 1940s was mostly the result of increased government expenditures.

Accepted Answer

A) True 
 B)False

Question 7

When the government spends more, what is the initial effect?

Accepted Answer

A)  Aggregate demand shifts right. 
B)  Aggregate demand shifts left. 
C)  Aggregate supply shifts right. 
D)  Aggregate supply shifts left. 
A)  Aggregate demand shifts right. 
B)  Aggregate demand shifts left. 
C)  Aggregate supply shifts right. 
D)  Aggregate supply shifts left.

Question 8

Why does an increase in the price level result in a decrease in the aggregate quantity of goods and services demanded?

Accepted Answer

A)  because as wealth rises, interest rates rise, and the dollar appreciates 
B)  because as wealth rises, interest rates fall, and the dollar depreciates 
C)  because as wealth falls, interest rates rise, and the dollar appreciates 
D)  because as wealth falls, interest rates fall, and the dollar depreciates 
A)  because as wealth rises, interest rates rise, and the dollar appreciates 
B)  because as wealth rises, interest rates fall, and the dollar depreciates 
C)  because as wealth falls, interest rates rise, and the dollar appreciates 
D)  because as wealth falls, interest rates fall, and the dollar depreciates

Question 9

What are the effects of an increase in the price level?

Accepted Answer

A)  People hold less money, so they lend less, and the interest rate rises. 
B)  People hold less money, so they lend more, and the interest rate falls. 
C)  People hold more money, so they lend more, and the interest rate falls. 
D)  People hold more money, so they lend less, and the interest rate rises. 
A)  People hold less money, so they lend less, and the interest rate rises. 
B)  People hold less money, so they lend more, and the interest rate falls. 
C)  People hold more money, so they lend more, and the interest rate falls. 
D)  People hold more money, so they lend less, and the interest rate rises.

Question 10

Scenario 14-1
The economy is in long-run equilibrium. Suddenly, due to improved international relations, a boom experienced by a major trading partner, and the increased confidence of policymakers, citizens become more optimistic about the future and stay this way for a long time.
-Refer to the Scenario 14-1. In the long-run, how does the change in price expectations created by optimism change the aggregate demand and aggregate supply diagram?

Accepted Answer

A)  The long-run aggregate-supply curve shifts left. 
B)  The long-run aggregate-supply curve shifts right. 
C)  The short-run aggregate-supply curve shifts right. 
D)  The short-run aggregate-supply curve shifts left. 
A)  The long-run aggregate-supply curve shifts left. 
B)  The long-run aggregate-supply curve shifts right. 
C)  The short-run aggregate-supply curve shifts right. 
D)  The short-run aggregate-supply curve shifts left.

Question 11

Which statement best describes the effects of an increase in the price level?

Accepted Answer

A)  Dollars are worth more, so people spend more. 
B)  Dollars are worth more, so people spend less. 
C)  Dollars are worth less, so people spend more. 
D)  Dollars are worth less, so people spend less. 
A)  Dollars are worth more, so people spend more. 
B)  Dollars are worth more, so people spend less. 
C)  Dollars are worth less, so people spend more. 
D)  Dollars are worth less, so people spend less.

Question 12

Suppose a stock market boom makes people feel wealthier. What are the effects of this increase in wealth?

Accepted Answer

A)  increased consumption, which shifts the aggregate-demand curve right 
B)  increased consumption, which shifts the aggregate-demand curve left 
C)  decreased consumption, which shifts the aggregate-demand curve right 
D)  decreased consumption, which shifts the aggregate-demand curve left 
A)  increased consumption, which shifts the aggregate-demand curve right 
B)  increased consumption, which shifts the aggregate-demand curve left 
C)  decreased consumption, which shifts the aggregate-demand curve right 
D)  decreased consumption, which shifts the aggregate-demand curve left

Question 13

How do changes in the price of oil affect economies?

Accepted Answer

A)  They lead to increased nominal GDP. 
B)  They do not contribute much to output fluctuations. 
C)  They change the economy principally by changing aggregate demand. 
D)  They may create both inflation and recession. 
A)  They lead to increased nominal GDP. 
B)  They do not contribute much to output fluctuations. 
C)  They change the economy principally by changing aggregate demand. 
D)  They may create both inflation and recession.

Question 14

Which of the following shifts the short-run aggregate supply right?

Accepted Answer

A)  an increase in government spending 
B)  an increase in manufacturing wages 
C)  a decrease in the price of oil 
D)  a decrease in immigration from abroad 
A)  an increase in government spending 
B)  an increase in manufacturing wages 
C)  a decrease in the price of oil 
D)  a decrease in immigration from abroad

Question 15

Which of the following shifts the short-run aggregate supply left?

Accepted Answer

A)  an increase in price expectations 
B)  an increase in the price level 
C)  an increase in immigration 
D)  an increase in exports 
A)  an increase in price expectations 
B)  an increase in the price level 
C)  an increase in immigration 
D)  an increase in exports

Question 16

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

Accepted Answer

A)  from C to B in the short run and the long run 
B)  from C to D in the short run and the long run 
C)  from C to B in the short run and to A in the long run 
D)  from C to D in the short run and back to C in the long run 
A)  from C to B in the short run and the long run 
B)  from C to D in the short run and the long run 
C)  from C to B in the short run and to A in the long run 
D)  from C to D in the short run and back to C in the long run

Question 17

Why is the aggregate demand curve downward sloping?

Accepted Answer

A)  because the more people buy, the fewer additional purchases they need 
B)  because people buy something else when the price goes up 
C)  because people feel poorer and buy less when prices go up 
D)  because the more people wish to consume, the lower the price is 
A)  because the more people buy, the fewer additional purchases they need 
B)  because people buy something else when the price goes up 
C)  because people feel poorer and buy less when prices go up 
D)  because the more people wish to consume, the lower the price is

In the mid-1970s the price of oil rose dramatically. What did this event cause?

The long-run trend in real GDP is upward. How is this possible given business cycles? What explains the upward trend?

When taxes increase, consumption decreases. How is this situation represented in the aggregate demand and aggregate supply model?

In the aggregate demand and aggregate supply model, when does the aggregate quantity of goods demanded decrease?

Increased output and prices in Canada in the early 1940s was mostly the result of increased government expenditures.

When the government spends more, what is the initial effect?

Why does an increase in the price level result in a decrease in the aggregate quantity of goods and services demanded?

What are the effects of an increase in the price level?

Which statement best describes the effects of an increase in the price level?

Suppose a stock market boom makes people feel wealthier. What are the effects of this increase in wealth?

How do changes in the price of oil affect economies?

Which of the following shifts the short-run aggregate supply right?

Which of the following shifts the short-run aggregate supply left?

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

Why is the aggregate demand curve downward sloping?

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

In the mid-1970s the price of oil rose dramatically. What did this event cause?

The long-run trend in real GDP is upward. How is this possible given business cycles? What explains the upward trend?

When taxes increase, consumption decreases. How is this situation represented in the aggregate demand and aggregate supply model?

In the aggregate demand and aggregate supply model, when does the aggregate quantity of goods demanded decrease?

Increased output and prices in Canada in the early 1940s was mostly the result of increased government expenditures.

When the government spends more, what is the initial effect?

Why does an increase in the price level result in a decrease in the aggregate quantity of goods and services demanded?

What are the effects of an increase in the price level?

Which statement best describes the effects of an increase in the price level?

Suppose a stock market boom makes people feel wealthier. What are the effects of this increase in wealth?

How do changes in the price of oil affect economies?

Which of the following shifts the short-run aggregate supply right?

Which of the following shifts the short-run aggregate supply left?

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

Why is the aggregate demand curve downward sloping?

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