Question 1

In which situation does investment spending increase?

Accepted Answer

A)  when the price level rises, causing interest rates to rise 
B)  when the price level rises, causing interest rates to fall 
C)  when the price level falls, causing interest rates to rise 
D)  when the price level falls, causing interest rates to fall 
A)  when the price level rises, causing interest rates to rise 
B)  when the price level rises, causing interest rates to fall 
C)  when the price level falls, causing interest rates to rise 
D)  when the price level falls, causing interest rates to fall

Question 2

Suppose the economy is in long-run equilibrium. In a short span of time, there is a large influx of skilled immigrants, a major new discovery of oil, and a major new technological advance in electricity production. In the short run, what would we expect to happen?

Accepted Answer

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

Question 3

Suppose the economy is in long-run equilibrium. If there is a sharp increase in the stock market combined with a significant number of skilled workers retiring, what would we expect to 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 4

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

Accepted Answer

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

Question 5

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

Accepted Answer

A)  if a hurricane destroyed several factories 
B)  if the corporate tax rates decrease 
C)  if new oil deposits are discovered 
D)  if the money supply increases 
A)  if a hurricane destroyed several factories 
B)  if the corporate tax rates decrease 
C)  if new oil deposits are discovered 
D)  if the money supply increases

Question 6

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

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 7

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

Accepted Answer

A)  if the minimum wage increases 
B)  if the capital stock decreases 
C)  if interest rates increase 
D)  if technology advances 
A)  if the minimum wage increases 
B)  if the capital stock decreases 
C)  if interest rates increase 
D)  if technology advances

Question 8

Which of the following is NOT an explanation for the instability of oil prices?

Accepted Answer

A)  technological advances that have made it profitable to develop oil 
B)  fluctuations in the rate of growth in major economies 
C)  barriers to ship oil to overseas markets 
D)  environmental groups' desire to maintain current levels of carbon emissions 
A)  technological advances that have made it profitable to develop oil 
B)  fluctuations in the rate of growth in major economies 
C)  barriers to ship oil to overseas markets 
D)  environmental groups' desire to maintain current levels of carbon emissions

Question 9

What is included in the aggregate demand for goods and services?

Accepted Answer

A)  labour 
B)  technology 
C)  net exports 
D)  government bonds 
A)  labour 
B)  technology 
C)  net exports 
D)  government bonds

Question 10

How does the size of investment as a fraction of GDP compare to its importance in creating economic fluctuations?

Accepted Answer

A)  Investment is a small part of real GDP, and it accounts for a small share of the fluctuation in real GDP. 
B)  Investment is a small part of real GDP, yet it accounts for a large share of the fluctuation in real GDP. 
C)  Investment is a large part of real GDP, and it accounts for a large share of the fluctuation in real GDP. 
D)  Investment is a large part of real GDP, yet it accounts for a small share of the fluctuation in real GDP. 
A)  Investment is a small part of real GDP, and it accounts for a small share of the fluctuation in real GDP. 
B)  Investment is a small part of real GDP, yet it accounts for a large share of the fluctuation in real GDP. 
C)  Investment is a large part of real GDP, and it accounts for a large share of the fluctuation in real GDP. 
D)  Investment is a large part of real GDP, yet it accounts for a small share of the fluctuation in real GDP.

Question 11

What are the effects of a decrease in the price level?

Accepted Answer

A)  The real interest rate increases, the dollar appreciates, and net exports increase. 
B)  The real interest rate increases, the dollar depreciates, and net exports decrease. 
C)  The real interest rate decreases, the dollar depreciates, and net exports increase. 
D)  The real interest rate decreases, the dollar appreciates, and net exports decrease. 
A)  The real interest rate increases, the dollar appreciates, and net exports increase. 
B)  The real interest rate increases, the dollar depreciates, and net exports decrease. 
C)  The real interest rate decreases, the dollar depreciates, and net exports increase. 
D)  The real interest rate decreases, the dollar appreciates, and net exports decrease.

Question 12

Suppose the economy is in long-run equilibrium. In a short span of time, there is a sharp increase in the minimum wage. In the short run, what would we expect to happen?

Accepted Answer

A)  the price level to rise, and real GDP to fall 
B)  the price level to fall, and real GDP to remain unchanged 
C)  the price level to remain unchanged, and real GDP to fall 
D)  the price level to fall, and the real GDP to rise the same 
A)  the price level to rise, and real GDP to fall 
B)  the price level to fall, and real GDP to remain unchanged 
C)  the price level to remain unchanged, and real GDP to fall 
D)  the price level to fall, and the real GDP to rise the same

Question 13

Figure 14-1  
-Refer to Figure 14-1. How would an adverse shift in aggregate supply move the economy?

Accepted Answer

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

Question 14

A decrease in the money supply causes the interest rate to rise so that investment rises.

Accepted Answer

A) True 
 B)False

Question 15

How does an economic contraction that is caused by a shift in aggregate demand remedy itself over time?

Accepted Answer

A)  The expected price level rises, shifting aggregate demand right. 
B)  The expected price level rises, shifting aggregate demand left. 
C)  The expected price level falls, shifting aggregate supply right. 
D)  The expected price level falls, shifting aggregate supply left. 
A)  The expected price level rises, shifting aggregate demand right. 
B)  The expected price level rises, shifting aggregate demand left. 
C)  The expected price level falls, shifting aggregate supply right. 
D)  The expected price level falls, shifting aggregate supply left.

Question 16

John Maynard Keynes advocated policies that would increase aggregate demand as a way to decrease unemployment caused by recessions.

Accepted Answer

A) True 
 B)False

Question 17

When did the recession that saw the largest spike in the unemployment rate in Canada begin?

Accepted Answer

A)  1979 
B)  1982 
C)  1991 
D)  2008 
A)  1979 
B)  1982 
C)  1991 
D)  2008

Question 18

Which part of real GDP fluctuate most over the course of the business cycle?

Accepted Answer

A)  consumption 
B)  government expenditures 
C)  investment 
D)  net exports 
A)  consumption 
B)  government expenditures 
C)  investment 
D)  net exports

Question 19

Suppose the economy is in long-run equilibrium. Premier Aviary succeeds in getting a major new highway project for his province. At the same time, Premier Green succeeds in getting major new restrictions on logging enacted for her province. In the short run, what would we expect to happen?

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 20

Use the sticky-wage theory to explain why an increase in the expected price level shifts the aggregate-supply curve.

Accepted Answer

When people expect the price l

In which situation does investment spending increase?

Suppose the economy is in long-run equilibrium. In a short span of time, there is a large influx of skilled immigrants, a major new discovery of oil, and a major new technological advance in electricity production. In the short run, what would we expect to happen?

Suppose the economy is in long-run equilibrium. If there is a sharp increase in the stock market combined with a significant number of skilled workers retiring, what would we expect to happen in the short run?

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

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

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

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

Which of the following is NOT an explanation for the instability of oil prices?

What is included in the aggregate demand for goods and services?

How does the size of investment as a fraction of GDP compare to its importance in creating economic fluctuations?

What are the effects of a decrease in the price level?

Suppose the economy is in long-run equilibrium. In a short span of time, there is a sharp increase in the minimum wage. In the short run, what would we expect to happen?

Figure 14-1 -Refer to Figure 14-1. How would an adverse shift in aggregate supply move the economy?

A decrease in the money supply causes the interest rate to rise so that investment rises.

How does an economic contraction that is caused by a shift in aggregate demand remedy itself over time?

John Maynard Keynes advocated policies that would increase aggregate demand as a way to decrease unemployment caused by recessions.

When did the recession that saw the largest spike in the unemployment rate in Canada begin?

Which part of real GDP fluctuate most over the course of the business cycle?

Suppose the economy is in long-run equilibrium. Premier Aviary succeeds in getting a major new highway project for his province. At the same time, Premier Green succeeds in getting major new restrictions on logging enacted for her province. In the short run, what would we expect to happen?

Use the sticky-wage theory to explain why an increase in the expected price level shifts the aggregate-supply curve.

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

Exam 14: Aggregate Demand and Aggregate Supply

In which situation does investment spending increase?

Suppose the economy is in long-run equilibrium. In a short span of time, there is a large influx of skilled immigrants, a major new discovery of oil, and a major new technological advance in electricity production. In the short run, what would we expect to happen?

Suppose the economy is in long-run equilibrium. If there is a sharp increase in the stock market combined with a significant number of skilled workers retiring, what would we expect to happen in the short run?

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

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

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

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

Which of the following is NOT an explanation for the instability of oil prices?

What is included in the aggregate demand for goods and services?

How does the size of investment as a fraction of GDP compare to its importance in creating economic fluctuations?

What are the effects of a decrease in the price level?

Suppose the economy is in long-run equilibrium. In a short span of time, there is a sharp increase in the minimum wage. In the short run, what would we expect to happen?

Figure 14-1 -Refer to Figure 14-1. How would an adverse shift in aggregate supply move the economy?

A decrease in the money supply causes the interest rate to rise so that investment rises.

How does an economic contraction that is caused by a shift in aggregate demand remedy itself over time?

John Maynard Keynes advocated policies that would increase aggregate demand as a way to decrease unemployment caused by recessions.

When did the recession that saw the largest spike in the unemployment rate in Canada begin?

Which part of real GDP fluctuate most over the course of the business cycle?

Suppose the economy is in long-run equilibrium. Premier Aviary succeeds in getting a major new highway project for his province. At the same time, Premier Green succeeds in getting major new restrictions on logging enacted for her province. In the short run, what would we expect to happen?

Use the sticky-wage theory to explain why an increase in the expected price level shifts the aggregate-supply curve.

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