Question 1

How is the effect of a decrease in the price level represented?

Accepted Answer

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

Question 2

In which situation are people most likely to spend more?

Accepted Answer

A)  when stock prices and interest rates rise 
B)  when their real wealth rises and interest rates fall 
C)  when stock prices fall and interest rates rise 
D)  when their real wealth and interest rates fall 
A)  when stock prices and interest rates rise 
B)  when their real wealth rises and interest rates fall 
C)  when stock prices fall and interest rates rise 
D)  when their real wealth and interest rates fall

Question 3

Scenario 14-2
The economy is in long-run equilibrium. Suddenly, due to corporate scandals, a recession experienced by a major trading partner, and the loss of confidence among policymakers, citizens become pessimistic concerning the future. They maintain this level of pessimism for a long time.
-Refer to the Scenario 14-2. How does the new long-run equilibrium differ from the original one?

Accepted Answer

A)  Both the price level and real GDP are higher. 
B)  Both the price level and real GDP are lower. 
C)  The price level is the same and real GDP is lower. 
D)  The price level is lower and real GDP is the same. 
A)  Both the price level and real GDP are higher. 
B)  Both the price level and real GDP are lower. 
C)  The price level is the same and real GDP is lower. 
D)  The price level is lower and real GDP is the same.

Question 4

What is one explanation for the instability of oil prices?

Accepted Answer

A)  inefficient production techniques that have made it unprofitable to develop oil 
B)  fluctuations in the inflation rate in major economies 
C)  pressure from environmental groups to reduce carbon emissions
D expansion in the market for Canadian oil due to new pipeline construction 
A)  inefficient production techniques that have made it unprofitable to develop oil 
B)  fluctuations in the inflation rate in major economies 
C)  pressure from environmental groups to reduce carbon emissions
D expansion in the market for Canadian oil due to new pipeline construction

Question 5

What are the effects of a decrease in Canadian interest rates?

Accepted Answer

A)  a depreciation of the dollar and greater net exports 
B)  a depreciation of the dollar and smaller net exports 
C)  an appreciation of the dollar and greater net exports 
D)  an appreciation of the dollar and smaller net exports 
A)  a depreciation of the dollar and greater net exports 
B)  a depreciation of the dollar and smaller net exports 
C)  an appreciation of the dollar and greater net exports 
D)  an appreciation of the dollar and smaller net exports

Question 6

An aggregate-supply curve is described by the equation Y=80 + 0.5P. The expected price level is 100. How much is the long-run level of output?

Accepted Answer

The standard form of a short-run aggrega

Question 7

By how much did the real GDP per person increase during World War II?

Accepted Answer

A)  20 percent 
B)  40 percent 
C)  60 percent 
D)  80 percent 
A)  20 percent 
B)  40 percent 
C)  60 percent 
D)  80 percent

Question 8

During Canada's three last recessions, investment spending accounted for what percentage of the decline in GDP?

Accepted Answer

A)  20 percent 
B)  40 percent 
C)  60 percent 
D)  80 percent 
A)  20 percent 
B)  40 percent 
C)  60 percent 
D)  80 percent

Question 9

Which term refers to a short period of falling incomes and rising unemployment?

Accepted Answer

A)  depression 
B)  recession 
C)  stagflation 
D)  sticky wages 
A)  depression 
B)  recession 
C)  stagflation 
D)  sticky wages

Question 10

Which statement is consistent with the theory of aggregate supply?

Accepted Answer

A)  An increase in the expected price level shifts the short-run aggregate-supply curve to the right, and an increase in the actual price level shifts the short-run aggregate supply to the right. 
B)  An increase in the expected price level shifts the short-run aggregate-supply curve to the right, and an increase in the actual price level does not shift the short-run aggregate supply. 
C)  An increase in the expected price level shifts the short-run aggregate-supply curve to the left, and an increase in the actual price level shifts the short-run aggregate supply to the left. 
D)  An increase in the expected price level shifts the short-run aggregate-supply curve to the left, and an increase in the actual price level does not shift the short-run aggregate supply. 
A)  An increase in the expected price level shifts the short-run aggregate-supply curve to the right, and an increase in the actual price level shifts the short-run aggregate supply to the right. 
B)  An increase in the expected price level shifts the short-run aggregate-supply curve to the right, and an increase in the actual price level does not shift the short-run aggregate supply. 
C)  An increase in the expected price level shifts the short-run aggregate-supply curve to the left, and an increase in the actual price level shifts the short-run aggregate supply to the left. 
D)  An increase in the expected price level shifts the short-run aggregate-supply curve to the left, and an increase in the actual price level does not shift the short-run aggregate supply.

Question 11

Which of the following adjusts to bring aggregate supply and demand into balance?

Accepted Answer

A)  the price level 
B)  the real rate of interest 
C)  the money supply 
D)  immigration 
A)  the price level 
B)  the real rate of interest 
C)  the money supply 
D)  immigration

Question 12

Suppose the economy is in long-run equilibrium. If there is a sharp increase in the minimum wage as well as an increase in pessimism about future business conditions, 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 13

What would make the price level decrease and real GDP increase?

Accepted Answer

A)  Long-run aggregate supply shifts right. 
B)  Long-run aggregate supply shifts left. 
C)  Aggregate demand shifts right. 
D)  Aggregate demand shifts left. 
A)  Long-run aggregate supply shifts right. 
B)  Long-run aggregate supply shifts left. 
C)  Aggregate demand shifts right. 
D)  Aggregate demand shifts left.

Question 14

Which statement best describes the beginning of a recession?

Accepted Answer

A)  Production and unemployment both rise. 
B)  Production rises and unemployment falls. 
C)  Production falls and unemployment rises. 
D)  Production and unemployment both fall. 
A)  Production and unemployment both rise. 
B)  Production rises and unemployment falls. 
C)  Production falls and unemployment rises. 
D)  Production and unemployment both fall.

Question 15

Figure 14-1  
-Refer to Figure 14-1. If the economy is at C and there is an increase in aggregate demand, what happens to the economy in the short run?

Accepted Answer

A)  It stays at A. 
B)  It moves to B. 
C)  It moves to C. 
D)  It moves to D. 
A)  It stays at A. 
B)  It moves to B. 
C)  It moves to C. 
D)  It moves to D.

Question 16

Which statement best explains an increase in consumer spending?

Accepted Answer

A)  People spend more when the price level rises because the dollars they hold are worth more. 
B)  People spend more when the price level rises because the dollars they hold are worth less. 
C)  People spend more when the price level falls because the dollars they hold are worth more. 
D)  People spend more when the price level falls because the dollars they hold are worth less. 
A)  People spend more when the price level rises because the dollars they hold are worth more. 
B)  People spend more when the price level rises because the dollars they hold are worth less. 
C)  People spend more when the price level falls because the dollars they hold are worth more. 
D)  People spend more when the price level falls because the dollars they hold are worth less.

Question 17

What happened in the first few years of the Great Depression?

Accepted Answer

A)  Unemployment rose by about 10 percent, and prices rose about 27 percent. 
B)  Unemployment rose by about 19 percent, and prices rose about 12 percent. 
C)  Unemployment rose by about 20 percent, and prices fell about 12 percent. 
D)  Unemployment rose by about 21 percent, and prices fell about 19 percent. 
A)  Unemployment rose by about 10 percent, and prices rose about 27 percent. 
B)  Unemployment rose by about 19 percent, and prices rose about 12 percent. 
C)  Unemployment rose by about 20 percent, and prices fell about 12 percent. 
D)  Unemployment rose by about 21 percent, and prices fell about 19 percent.

Question 18

An economy is described by the aggregate-demand curve Y=70-P and the short-run the aggregate-supply curve Y=10+2P.
a) If the economy is in long-run equilibrium, what are the long-run level of output, the actual, and the expected price level?
b) Suppose consumers' confidence in the economy declines so that the aggregate demand declines by 10 percent. Calculate the new short-run equilibrium. What is the rate of change in output induced by the decline in confidence? What is the inflation rate?
c) After a while, when some people observe the reduced economic activity and unemployment rises, they accept lower wages. Calculate the long-run output and price level.

Accepted Answer

a) If the economy is in equilibrium, the

Question 19

How does real GDP change over time?

Accepted Answer

A)  It moves in the same direction as unemployment. 
B)  It moves in the same direction as inflation. 
C)  It has a long-term upward trend. 
D)  It is approximately constant because it is measured in constant dollars. 
A)  It moves in the same direction as unemployment. 
B)  It moves in the same direction as inflation. 
C)  It has a long-term upward trend. 
D)  It is approximately constant because it is measured in constant dollars.

Question 20

An unexpected increase in the price level does not shift the aggregate-supply curve, but an expected increase in the price level shifts the aggregate-supply curve to the left.

Accepted Answer

A) True 
 B)False

How is the effect of a decrease in the price level represented?

In which situation are people most likely to spend more?

What is one explanation for the instability of oil prices?

What are the effects of a decrease in Canadian interest rates?

An aggregate-supply curve is described by the equation Y=80 + 0.5P. The expected price level is 100. How much is the long-run level of output?

By how much did the real GDP per person increase during World War II?

During Canada's three last recessions, investment spending accounted for what percentage of the decline in GDP?

Which term refers to a short period of falling incomes and rising unemployment?

Which statement is consistent with the theory of aggregate supply?

Which of the following adjusts to bring aggregate supply and demand into balance?

Suppose the economy is in long-run equilibrium. If there is a sharp increase in the minimum wage as well as an increase in pessimism about future business conditions, what would we expect to happen in the short run?

What would make the price level decrease and real GDP increase?

Which statement best describes the beginning of a recession?

Figure 14-1 -Refer to Figure 14-1. If the economy is at C and there is an increase in aggregate demand, what happens to the economy in the short run?

Which statement best explains an increase in consumer spending?

What happened in the first few years of the Great Depression?

How does real GDP change over time?

An unexpected increase in the price level does not shift the aggregate-supply curve, but an expected increase in the price level shifts the aggregate-supply curve to the left.

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

How is the effect of a decrease in the price level represented?

In which situation are people most likely to spend more?

What is one explanation for the instability of oil prices?

What are the effects of a decrease in Canadian interest rates?

An aggregate-supply curve is described by the equation Y=80 + 0.5P. The expected price level is 100. How much is the long-run level of output?

By how much did the real GDP per person increase during World War II?

During Canada's three last recessions, investment spending accounted for what percentage of the decline in GDP?

Which term refers to a short period of falling incomes and rising unemployment?

Which statement is consistent with the theory of aggregate supply?

Which of the following adjusts to bring aggregate supply and demand into balance?

Suppose the economy is in long-run equilibrium. If there is a sharp increase in the minimum wage as well as an increase in pessimism about future business conditions, what would we expect to happen in the short run?

What would make the price level decrease and real GDP increase?

Which statement best describes the beginning of a recession?

Figure 14-1 -Refer to Figure 14-1. If the economy is at C and there is an increase in aggregate demand, what happens to the economy in the short run?

Which statement best explains an increase in consumer spending?

What happened in the first few years of the Great Depression?

How does real GDP change over time?

An unexpected increase in the price level does not shift the aggregate-supply curve, but an expected increase in the price level shifts the aggregate-supply curve to the left.

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