Exam 23: Output and Prices in the Short Run

Consider the following news headline: ʺWorld commodity prices rise sharply.ʺ Choose the statement below that best describes the likely macroeconomic effects in Canada. Remember that Canada is both a producer and a consumer of commodities.)

Consider the basic AD/AS model. If there is a decrease in the cost of non-labour inputs to production, the result will be to

All points on an economyʹs AD curve

FIGURE 23-3 -Refer to Figure 23-3. Which of the following statements best describes the supply side of Economy A in its current equilibrium position?

Suppose the economy is hit by a shock and we observe that the price level has decreased whereas real GDP has increased. We can conclude that this shock was

FIGURE 23-1 -Refer to Figure 23-1. Assume the economy is initially in equilibrium with desired aggregate expenditure equal to real GDP at point V. The price level is P0. Now, suppose the AE curve shifts to AE2 and we move to a new equilibrium level of GDP at Y2 and point C on AD0. A possible cause of this change in equilibrium is

If the economyʹs AS curve is vertical, the multiplier in the AD/AS model is

FIGURE 23-5 -Refer to Figure 23-5. Suppose that an increase in autonomous investment by 40 causes the AD curve to shift to the right, as shown. The simple multiplier is and the multiplier is .

FIGURE 23-5 -Refer to Figure 23-5. Suppose that an increase in autonomous investment caused the AD curve to shift to the right, as shown. If the simple multiplier in this model is 4, then how much was the increase in investment?

Consider a simple macro model with demand-determined output. An exogenous increase in the domestic price level will

Consider the basic AD/AS model in the short run. When there is a change in autonomous desired expenditure, the simple multiplier is equal to the

Other things being equal, when the domestic price level rises exogenously,

Consider the following news headline: ʺInformation technology costs for Canadian firms continue to drop.ʺ Choose the statement below that best describes the likely macroeconomic effect.

FIGURE 23-1 -Refer to Figure 23-1. Assume the economy is initially in equilibrium with desired aggregate expenditure equal to real GDP at point V. The price level is P0. Now, suppose the AE curve shifts to AE2 and we move to a new equilibrium level of GDP at Y2 and point E on AD2. A possible cause of this change in equilibrium is

If the economy is in macroeconomic equilibrium with a vertical AS curve, and then aggregate demand increases, we expect the AE function to shift to a

If the economyʹs AS curve is very steep and there is a negative aggregate demand shock, the result will be

Aggregate demand AD) shocks have a smaller effect on real GDP and a larger effect on the price level

Which of the following would likely cause a downward shift in the AE curve and a movement upward along the AD curve?

When the economyʹs AS curve is positively sloped, the multiplier in the AD/AS model is

Consider the economyʹs aggregate supply curve. Other things being equal, unit costs will tend to increase if