Question 1

Assuming that a is positive, how are theories of short-run aggregate supply expressed mathematically?

Accepted Answer

A)  quantity of output supplied = natural rate of output + a(actual price level - expected price level) 
B)  quantity of output supplied = natural rate of output + a(expected price level - actual price level) 
C)  quantity of output supplied = a(actual price level - expected price level) - natural rate of output 
D)  quantity of output supplied = a(expected price level - actual price level) - natural rate of output 
A)  quantity of output supplied = natural rate of output + a(actual price level - expected price level) 
B)  quantity of output supplied = natural rate of output + a(expected price level - actual price level) 
C)  quantity of output supplied = a(actual price level - expected price level) - natural rate of output 
D)  quantity of output supplied = a(expected price level - actual price level) - natural rate of output

Question 2

If the economy is initially in long-run equilibrium, which statement best describes the effects of a shift in aggregate demand?

Accepted Answer

A)  Prices and output are affected in both the short and long run. 
B)  Prices and output are affected only in the short run. 
C)  Prices are affected in the long and short run, but output only in the short run. 
D)  Prices are affected in the long and short run, but output only in the long run. 
A)  Prices and output are affected in both the short and long run. 
B)  Prices and output are affected only in the short run. 
C)  Prices are affected in the long and short run, but output only in the short run. 
D)  Prices are affected in the long and short run, but output only in the long run.

Question 3

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

Accepted Answer

A)  a decrease in the price level 
B)  a decrease in the expected price level 
C)  a decrease in the working age population 
D)  a decrease in consumption 
A)  a decrease in the price level 
B)  a decrease in the expected price level 
C)  a decrease in the working age population 
D)  a decrease in consumption

Question 4

Which of the following shifts aggregate demand to the left?

Accepted Answer

A)  an increase in the price level 
B)  an increase in payroll taxes 
C)  an increase in net exports 
D)  an investment tax credit 
A)  an increase in the price level 
B)  an increase in payroll taxes 
C)  an increase in net exports 
D)  an investment tax credit

Question 5

In which situation would stagflation exist?

Accepted Answer

A)  when prices and output rise 
B)  when prices rise and output falls 
C)  when prices fall and output rises 
D)  when prices and output fall 
A)  when prices and output rise 
B)  when prices rise and output falls 
C)  when prices fall and output rises 
D)  when prices and output fall

Question 6

After a major flood destroyed a large residential area in Winnipeg, what might have happened?

Accepted Answer

A)  Aggregate demand shifted to the right and prices increased. 
B)  Aggregate demand shifted to the left and prices increased. 
C)  Aggregate demand shifted to the right and prices decreased. 
D)  Aggregate demand shifted to the left and prices decreased. 
A)  Aggregate demand shifted to the right and prices increased. 
B)  Aggregate demand shifted to the left and prices increased. 
C)  Aggregate demand shifted to the right and prices decreased. 
D)  Aggregate demand shifted to the left and prices decreased.

Question 7

Which relationship does the model of aggregate demand and aggregate supply explain?

Accepted Answer

A)  the relationship between the price and quantity of a particular good 
B)  the relationship between the interest rate and output 
C)  the relationship between wages and employment 
D)  the relationship between real GDP and the price level 
A)  the relationship between the price and quantity of a particular good 
B)  the relationship between the interest rate and output 
C)  the relationship between wages and employment 
D)  the relationship between real GDP and the price level

Question 8

The explanations for the slopes of the aggregate-demand and aggregate-supply curves are the same as the explanations for the slope of demand and supply curves for specific goods and services.

Accepted Answer

A) True 
 B)False

Question 9

Suppose the economy is initially in long-run equilibrium. Which statement best describes the state of the economy after an increase in aggregate demand?

Accepted Answer

A)  Prices and output are higher. 
B)  Prices and output are lower. 
C)  Prices are higher and output is the same. 
D)  Prices are the same and output is lower. 
A)  Prices and output are higher. 
B)  Prices and output are lower. 
C)  Prices are higher and output is the same. 
D)  Prices are the same and output is lower.

Question 10

Suppose there is an increase in the availability of an important major resource, such as oil. Which shift would most likely occur?

Accepted Answer

A)  The aggregate supply would shift right. 
B)  The aggregate supply would shift left. 
C)  The aggregate demand would shift right. 
D)  The aggregate demand would shift left. 
A)  The aggregate supply would shift right. 
B)  The aggregate supply would shift left. 
C)  The aggregate demand would shift right. 
D)  The aggregate demand would shift left.

Question 11

What happens when the dollar depreciates?

Accepted Answer

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

Question 12

Consider the following equation where a is a positive number: quantity of output supplied = natural rate of output + a (actual price level - expected price level). What does this equation represent?

Accepted Answer

A)  an upward-sloping short-run aggregate-supply curve 
B)  a vertical long-run supply curve 
C)  a downward-sloping aggregate-demand curve 
D)  an upward-sloping aggregate-demand curve 
A)  an upward-sloping short-run aggregate-supply curve 
B)  a vertical long-run supply curve 
C)  a downward-sloping aggregate-demand curve 
D)  an upward-sloping aggregate-demand curve

Question 13

Which statement best explains the downward slope of the aggregate-demand curve?

Accepted Answer

A)  As the Canadian price level increases, the dollar depreciates and people buy more imports. 
B)  As the Canadian price level increases, the interest rate falls and firms invest less. 
C)  As the Canadian price level increases, people feel less wealthy and buy less goods and services. 
D)  As the Canadian price level increases, people buy more substitute goods. 
A)  As the Canadian price level increases, the dollar depreciates and people buy more imports. 
B)  As the Canadian price level increases, the interest rate falls and firms invest less. 
C)  As the Canadian price level increases, people feel less wealthy and buy less goods and services. 
D)  As the Canadian price level increases, people buy more substitute goods.

Question 14

According to classical economic theory, which of the following do changes in the money supply affect?

Accepted Answer

A)  incentives to invest 
B)  prices 
C)  unemployment rates 
D)  aggregate supply 
A)  incentives to invest 
B)  prices 
C)  unemployment rates 
D)  aggregate supply

Question 15

How much has Canada changed its oil consumption since the first OPEC price shock in 1973?

Accepted Answer

A)  increased by 20% 
B)  decreased by 30% 
C)  increased by 40% 
D)  decreased by more than 50% 
A)  increased by 20% 
B)  decreased by 30% 
C)  increased by 40% 
D)  decreased by more than 50%

Question 16

What does an increase in the interest rate cause?

Accepted Answer

A)  It causes investment to rise and the exchange rate to appreciate. 
B)  It causes investment to fall and the exchange rate to depreciate. 
C)  It causes investment to rise and the exchange rate to depreciate. 
D)  It causes investment to fall and the exchange rate to appreciate. 
A)  It causes investment to rise and the exchange rate to appreciate. 
B)  It causes investment to fall and the exchange rate to depreciate. 
C)  It causes investment to rise and the exchange rate to depreciate. 
D)  It causes investment to fall and the exchange rate to appreciate.

Question 17

According to classical economic theory, which of the following do changes in the money supply affect?

Accepted Answer

A)  real GDP 
B)  real interest rates 
C)  the price level 
D)  unemployment 
A)  real GDP 
B)  real interest rates 
C)  the price level 
D)  unemployment

Question 18

According to the sticky-wage theory, which statement is consistent with an unexpected fall 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 19

Below are pairs of GDP growth rates and unemployment rates. Economists would be shocked to see most of these pairs. Which pair of GDP growth rates and unemployment rates is most realistic?

Accepted Answer

A)  -4 percent, 2 percent 
B)  -2 percent, 18 percent 
C)  1 percent, 7 percent 
D)  5 percent, 0 percent 
A)  -4 percent, 2 percent 
B)  -2 percent, 18 percent 
C)  1 percent, 7 percent 
D)  5 percent, 0 percent

Question 20

Which statement best characterizes the aggregate-demand curve?

Accepted Answer

A)  It slopes downward because higher prices cause the exchange rate to depreciate. 
B)  It slopes downward because higher prices cause real wealth to decrease and interest rates to increase. 
C)  It slopes upward because higher prices cause people to increase their production. 
D)  It slopes upward because higher prices cause real wealth to increase and interest rates to decrease. 
A)  It slopes downward because higher prices cause the exchange rate to depreciate. 
B)  It slopes downward because higher prices cause real wealth to decrease and interest rates to increase. 
C)  It slopes upward because higher prices cause people to increase their production. 
D)  It slopes upward because higher prices cause real wealth to increase and interest rates to decrease.

Assuming that a is positive, how are theories of short-run aggregate supply expressed mathematically?

If the economy is initially in long-run equilibrium, which statement best describes the effects of a shift in aggregate demand?

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

Which of the following shifts aggregate demand to the left?

In which situation would stagflation exist?

After a major flood destroyed a large residential area in Winnipeg, what might have happened?

Which relationship does the model of aggregate demand and aggregate supply explain?

The explanations for the slopes of the aggregate-demand and aggregate-supply curves are the same as the explanations for the slope of demand and supply curves for specific goods and services.

Suppose the economy is initially in long-run equilibrium. Which statement best describes the state of the economy after an increase in aggregate demand?

Suppose there is an increase in the availability of an important major resource, such as oil. Which shift would most likely occur?

What happens when the dollar depreciates?

Consider the following equation where a is a positive number: quantity of output supplied = natural rate of output + a (actual price level - expected price level). What does this equation represent?

Which statement best explains the downward slope of the aggregate-demand curve?

According to classical economic theory, which of the following do changes in the money supply affect?

How much has Canada changed its oil consumption since the first OPEC price shock in 1973?

What does an increase in the interest rate cause?

According to classical economic theory, which of the following do changes in the money supply affect?

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

Below are pairs of GDP growth rates and unemployment rates. Economists would be shocked to see most of these pairs. Which pair of GDP growth rates and unemployment rates is most realistic?

Which statement best characterizes the aggregate-demand 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

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Exam 14: Aggregate Demand and Aggregate Supply

Assuming that a is positive, how are theories of short-run aggregate supply expressed mathematically?

If the economy is initially in long-run equilibrium, which statement best describes the effects of a shift in aggregate demand?

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

Which of the following shifts aggregate demand to the left?

In which situation would stagflation exist?

After a major flood destroyed a large residential area in Winnipeg, what might have happened?

Which relationship does the model of aggregate demand and aggregate supply explain?

The explanations for the slopes of the aggregate-demand and aggregate-supply curves are the same as the explanations for the slope of demand and supply curves for specific goods and services.

Suppose the economy is initially in long-run equilibrium. Which statement best describes the state of the economy after an increase in aggregate demand?

Suppose there is an increase in the availability of an important major resource, such as oil. Which shift would most likely occur?

What happens when the dollar depreciates?

Consider the following equation where a is a positive number: quantity of output supplied = natural rate of output + a (actual price level - expected price level). What does this equation represent?

Which statement best explains the downward slope of the aggregate-demand curve?

According to classical economic theory, which of the following do changes in the money supply affect?

How much has Canada changed its oil consumption since the first OPEC price shock in 1973?

What does an increase in the interest rate cause?

According to classical economic theory, which of the following do changes in the money supply affect?

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

Below are pairs of GDP growth rates and unemployment rates. Economists would be shocked to see most of these pairs. Which pair of GDP growth rates and unemployment rates is most realistic?

Which statement best characterizes the aggregate-demand 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