Question 1

Which expenditure item is responsible for the decrease in real GDP during a recession?

Accepted Answer

A)  mostly investment spending 
B)  mostly consumption spending 
C)  mostly government spending 
D)  mostly exports 
A)  mostly investment spending 
B)  mostly consumption spending 
C)  mostly government spending 
D)  mostly exports

Question 2

Which statement best characterizes the long-run aggregate-supply curve?

Accepted Answer

A)  It is horizontal. 
B)  It shows a positive relationship between price level and output. 
C)  It demonstrates the importance of money in the economy. 
D)  It shows that money does not influence real GDP in the long run. 
A)  It is horizontal. 
B)  It shows a positive relationship between price level and output. 
C)  It demonstrates the importance of money in the economy. 
D)  It shows that money does not influence real GDP in the long run.

Question 3

Why is the aggregate-supply curve upward sloping in the short run?

Accepted Answer

A)  because people buy less when prices go up 
B)  because prices adjust fast to balance supply and demand 
C)  because wages adjust fast to stabilize standards of living 
D)  because some producers believe that only the price of their product has changed 
A)  because people buy less when prices go up 
B)  because prices adjust fast to balance supply and demand 
C)  because wages adjust fast to stabilize standards of living 
D)  because some producers believe that only the price of their product has changed

Question 4

In which situation would the long-run aggregate-supply curve shift left?

Accepted Answer

A)  if the number of immigrants increases 
B)  if there is substantial flooding 
C)  if the government removes some environmental regulations that limit production methods 
D)  if trade barriers are removed 
A)  if the number of immigrants increases 
B)  if there is substantial flooding 
C)  if the government removes some environmental regulations that limit production methods 
D)  if trade barriers are removed

Question 5

Which of the following is NOT a reason for the Bank of Canada and the government to keep a close watch on the housing market?

Accepted Answer

A)  the potential effect on consumption spending caused by large decreases in housing prices 
B)  the financial consequences to mortgage holders if interest rates rise 
C)  the financial consequences to mortgage holders if house prices suddenly drop 
D)  the financial consequences to mortgage holders if house prices suddenly rise 
A)  the potential effect on consumption spending caused by large decreases in housing prices 
B)  the financial consequences to mortgage holders if interest rates rise 
C)  the financial consequences to mortgage holders if house prices suddenly drop 
D)  the financial consequences to mortgage holders if house prices suddenly rise

Question 6

What happens when the dollar appreciates?

Accepted Answer

A)  Canadian exports decrease while imports increase. 
B)  Canadian exports and imports decrease. 
C)  Canadian exports and imports increase. 
D)  Canadian exports increase while imports decrease. 
A)  Canadian exports decrease while imports increase. 
B)  Canadian exports and imports decrease. 
C)  Canadian exports and imports increase. 
D)  Canadian exports increase while imports decrease.

Question 7

An increase in the money supply raises output in the long run.

Accepted Answer

A) True 
 B)False

Question 8

Suppose a stock market crash makes people feel less wealthy. What are the effects of this decrease in wealth?

Accepted Answer

A)  a decrease in consumption, which shifts aggregate supply left 
B)  a decrease in consumption, which shifts aggregate demand left 
C)  an increase in consumption, which shifts aggregate supply right 
D)  an increase in consumption, which shifts aggregate demand right 
A)  a decrease in consumption, which shifts aggregate supply left 
B)  a decrease in consumption, which shifts aggregate demand left 
C)  an increase in consumption, which shifts aggregate supply right 
D)  an increase in consumption, which shifts aggregate demand right

Question 9

What is NOT included in aggregate demand?

Accepted Answer

A)  purchases of stock and bonds 
B)  purchases of services such as massages and acupuncture 
C)  purchases of military vehicles by the government 
D)  purchases by foreigners of consumer goods produced in Canada 
A)  purchases of stock and bonds 
B)  purchases of services such as massages and acupuncture 
C)  purchases of military vehicles by the government 
D)  purchases by foreigners of consumer goods produced in Canada

Question 10

Which statement best characterizes the long-run aggregate-supply curve?

Accepted Answer

A)  It is determined by the things that determine output in the classical model. 
B)  It is located at the point where unemployment is zero. 
C)  It shifts to the right when the price level increases. 
D)  It is positioned at the point where the economy would cease to grow. 
A)  It is determined by the things that determine output in the classical model. 
B)  It is located at the point where unemployment is zero. 
C)  It shifts to the right when the price level increases. 
D)  It is positioned at the point where the economy would cease to grow.

Question 11

Which of the following shifts the short-run, but not the long-run, aggregate supply right?

Accepted Answer

A)  a decrease in the price level 
B)  a decrease in the expected price level 
C)  a decrease in the natural rate of unemployment 
D)  a decrease in the savings rate 
A)  a decrease in the price level 
B)  a decrease in the expected price level 
C)  a decrease in the natural rate of unemployment 
D)  a decrease in the savings rate

Question 12

In addition to the price level, what does the aggregate demand and aggregate supply model focus on?

Accepted Answer

A)  real GDP 
B)  nominal GDP 
C)  the exchange rate 
D)  unemployment 
A)  real GDP 
B)  nominal GDP 
C)  the exchange rate 
D)  unemployment

Question 13

Which statement characterizes business cycles?

Accepted Answer

A)  They are predictable fluctuations in consumption. 
B)  They are no longer very important due to government policy. 
C)  They are fluctuations in real GDP and related variables over time. 
D)  They are easily predicted by competent economists. 
A)  They are predictable fluctuations in consumption. 
B)  They are no longer very important due to government policy. 
C)  They are fluctuations in real GDP and related variables over time. 
D)  They are easily predicted by competent economists.

Question 14

If speculators bid up the value of the dollar in the market for foreign-currency exchange, aggregate demand will shift to the left.

Accepted Answer

A) True 
 B)False

Question 15

Which statement best describes the effects of a fall 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 16

Review the sticky-wage theory of the short-run aggregate-supply curve.
a) Use the sticky-wage theory to explain why the short-run aggregate-supply curve is upward sloping.
b) Based on the same theory, construct an argument to explain why the aggregate-demand curve is downward sloping. Though simple and appealing, why may this theory not completely explain the short-run aggregate-demand curve?

Accepted Answer

a) When the price level increases beyond

Question 17

Suppose the Canadian economy is in long-run equilibrium. Then suppose the value of the Canadian dollar increases. At the same time, there is an increase in the number of skilled immigrants. What would we expect will happen in the short run?

Accepted Answer

A)  Real GDP will rise, and the price level might rise, fall, or stay the same. 
B)  Real GDP will fall, and the price level might rise, fall, or stay the same. 
C)  The price level will rise, and real GDP might rise, fall, or stay the same. 
D)  The price level will fall, and real GDP might rise, fall, or stay the same. 
A)  Real GDP will rise, and the price level might rise, fall, or stay the same. 
B)  Real GDP will fall, and the price level might rise, fall, or stay the same. 
C)  The price level will rise, and real GDP might rise, fall, or stay the same. 
D)  The price level will fall, and real GDP might rise, fall, or stay the same.

Question 18

What happens to prices and output when the long-run aggregate-supply curve shifts left?

Accepted Answer

A)  Prices and output both increase. 
B)  Prices and output both decrease. 
C)  Prices increase and output decreases. 
D)  Prices decrease and output increases. 
A)  Prices and output both increase. 
B)  Prices and output both decrease. 
C)  Prices increase and output decreases. 
D)  Prices decrease and output increases.

Question 19

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

Accepted Answer

A)  Some firms' prices are lower than desired, which increases their sales. 
B)  Some firms' prices are lower than desired, which depresses their sales. 
C)  Some firms' prices are higher than desired, which increases their sales. 
D)  Some firms' prices are higher than desired, which depresses their sales. 
A)  Some firms' prices are lower than desired, which increases their sales. 
B)  Some firms' prices are lower than desired, which depresses their sales. 
C)  Some firms' prices are higher than desired, which increases their sales. 
D)  Some firms' prices are higher than desired, which depresses their sales.

Question 20

When would the long-run aggregate-supply curve shift right?

Accepted Answer

A)  when immigration increases or the government makes a substantial increase in the minimum wage 
B)  when immigration decreases or the government abolishes the minimum wage 
C)  when immigration increases or the government abolishes the minimum wage 
D)  when immigration decreases or the government makes a substantial increase in the minimum wage 
A)  when immigration increases or the government makes a substantial increase in the minimum wage 
B)  when immigration decreases or the government abolishes the minimum wage 
C)  when immigration increases or the government abolishes the minimum wage 
D)  when immigration decreases or the government makes a substantial increase in the minimum wage

Which expenditure item is responsible for the decrease in real GDP during a recession?

Which statement best characterizes the long-run aggregate-supply curve?

Why is the aggregate-supply curve upward sloping in the short run?

In which situation would the long-run aggregate-supply curve shift left?

Which of the following is NOT a reason for the Bank of Canada and the government to keep a close watch on the housing market?

What happens when the dollar appreciates?

An increase in the money supply raises output in the long run.

Suppose a stock market crash makes people feel less wealthy. What are the effects of this decrease in wealth?

What is NOT included in aggregate demand?

Which statement best characterizes the long-run aggregate-supply curve?

Which of the following shifts the short-run, but not the long-run, aggregate supply right?

In addition to the price level, what does the aggregate demand and aggregate supply model focus on?

Which statement characterizes business cycles?

If speculators bid up the value of the dollar in the market for foreign-currency exchange, aggregate demand will shift to the left.

Which statement best describes the effects of a fall in the price level?

Suppose the Canadian economy is in long-run equilibrium. Then suppose the value of the Canadian dollar increases. At the same time, there is an increase in the number of skilled immigrants. What would we expect will happen in the short run?

What happens to prices and output when the long-run aggregate-supply curve shifts left?

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

When would the long-run aggregate-supply curve shift right?

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

Which expenditure item is responsible for the decrease in real GDP during a recession?

Which statement best characterizes the long-run aggregate-supply curve?

Why is the aggregate-supply curve upward sloping in the short run?

In which situation would the long-run aggregate-supply curve shift left?

Which of the following is NOT a reason for the Bank of Canada and the government to keep a close watch on the housing market?

What happens when the dollar appreciates?

An increase in the money supply raises output in the long run.

Suppose a stock market crash makes people feel less wealthy. What are the effects of this decrease in wealth?

What is NOT included in aggregate demand?

Which statement best characterizes the long-run aggregate-supply curve?

Which of the following shifts the short-run, but not the long-run, aggregate supply right?

In addition to the price level, what does the aggregate demand and aggregate supply model focus on?

Which statement characterizes business cycles?

If speculators bid up the value of the dollar in the market for foreign-currency exchange, aggregate demand will shift to the left.

Which statement best describes the effects of a fall in the price level?

Suppose the Canadian economy is in long-run equilibrium. Then suppose the value of the Canadian dollar increases. At the same time, there is an increase in the number of skilled immigrants. What would we expect will happen in the short run?

What happens to prices and output when the long-run aggregate-supply curve shifts left?

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

When would the long-run aggregate-supply curve shift right?

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