Question 1

Why does a decrease in the price level induce an increase in the aggregate quantity of goods and services demanded?

Accepted Answer

A) because as wealth falls, interest rates rise, and the dollar appreciates 
B) because as wealth falls, interest rates rise, and the dollar depreciates 
C) because as wealth rises, interest rates rise, and the dollar appreciates 
D) because as wealth rises, interest rates fall, and the dollar depreciates 
A) because as wealth falls, interest rates rise, and the dollar appreciates 
B) because as wealth falls, interest rates rise, and the dollar depreciates 
C) because as wealth rises, interest rates rise, and the dollar appreciates 
D) because as wealth rises, interest rates fall, and the dollar depreciates

Question 2

What happens when the price level rises?

Accepted Answer

A) The value of money rises, and exchange rates and interest rates also rise. 
B) The value of money rises, while exchange rates and interest rates fall. 
C) The value of money falls while exchange rates and interest rates rise. 
D) The value of money falls, and exchange rates and interest rates also fall. 
A) The value of money rises, and exchange rates and interest rates also rise. 
B) The value of money rises, while exchange rates and interest rates fall. 
C) The value of money falls while exchange rates and interest rates rise. 
D) The value of money falls, and exchange rates and interest rates also fall.

Question 3

What happens when the price level falls?

Accepted Answer

A) Interest rates rise, so firms increase investment. 
B) Interest rates rise, so firms decrease investment. 
C) Interest rates fall, so firms increase investment. 
D) Interest rates fall, so firms decrease investment. 
A) Interest rates rise, so firms increase investment. 
B) Interest rates rise, so firms decrease investment. 
C) Interest rates fall, so firms increase investment. 
D) Interest rates fall, so firms decrease investment.

Question 4

How do prices change due to an economic contraction that is caused by a shift in aggregate demand?

Accepted Answer

A) They rise in the short run and rise even more in the long run. 
B) They rise in the short run and fall back to their original level in the long run. 
C) They fall in the short run and fall even more in the long run. 
D) They fall in the short run and rise back to their original level in the long run. 
A) They rise in the short run and rise even more in the long run. 
B) They rise in the short run and fall back to their original level in the long run. 
C) They fall in the short run and fall even more in the long run. 
D) They fall in the short run and rise back to their original level in the long run.

Question 5

Stagflation would result from the aggregate-supply curve shifting left.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following measures the overall price level?

Accepted Answer

A) the price of some particular commodity or service 
B) the rate of inflation 
C) the consumer price index 
D) the nominal GDP 
A) the price of some particular commodity or service 
B) the rate of inflation 
C) the consumer price index 
D) the nominal GDP

Question 7

Compare the effects of an aggregate-demand-induced recession with an aggregate-supply-induced recession.How would you recognize that a recession is induced by demand or supply? What policies would be appropriate in the first case and what in the second?

Accepted Answer

An AD-induced recession lowers prices an

Question 8

Scenario 14-1
The economy is in long-run equilibrium. Suddenly, due to improved international relations and the increased confidence of policymakers, citizens become more optimistic about the future and stay this way for a long time.
-Refer to the Scenario 14-1.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 higher. 
D) The price level is higher 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 higher. 
D) The price level is higher and real GDP is the same.

Question 9

After a major flood destroyed an extended residential area in Calgary,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 10

According to the sticky-wage theory,which of the following 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 11

What happens when the price level rises?

Accepted Answer

A) Interest rates rise, so firms increase investment. 
B) Interest rates rise, so firms decrease investment. 
C) Interest rates fall, so firms increase investment. 
D) Interest rates fall, so firms decrease investment. 
A) Interest rates rise, so firms increase investment. 
B) Interest rates rise, so firms decrease investment. 
C) Interest rates fall, so firms increase investment. 
D) Interest rates fall, so firms decrease investment.

Question 12

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 13

Which of the following 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

All else equal,which of the following happens as the price level falls?

Accepted Answer

A) The money supply falls. 
B) Interest rates rise. 
C) Dollars become more valuable. 
D) Dollars become less valuable. 
A) The money supply falls. 
B) Interest rates rise. 
C) Dollars become more valuable. 
D) Dollars become less valuable.

Question 15

Suppose a stock market crash makes people feel poorer.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 16

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

Accepted Answer

A) The real value of money and the real exchange rate rise. 
B) The real value of money and the real exchange rate fall. 
C) The real value of money rises, and the real exchange rate falls. 
D) The real value of money falls, and the real exchange rate rises. 
A) The real value of money and the real exchange rate rise. 
B) The real value of money and the real exchange rate fall. 
C) The real value of money rises, and the real exchange rate falls. 
D) The real value of money falls, and the real exchange rate rises.

Question 17

Scenario 14-2
The economy is in long-run equilibrium. Suddenly, due to corporate scandals, international tensions, 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.Initially,which curve shifts in which direction?

Accepted Answer

A) AD shifts right. 
B) AD shifts left. 
C) Short-run AS shifts left. 
D) Short-run AS shifts right. 
A) AD shifts right. 
B) AD shifts left. 
C) Short-run AS shifts left. 
D) Short-run AS shifts right.

Question 18

What are the recessions of the 1970s often most attributed to?

Accepted Answer

A) declining inflation expectations 
B) an increase in oil prices 
C) declines in the price of stock 
D) decreases in the money supply 
A) declining inflation expectations 
B) an increase in oil prices 
C) declines in the price of stock 
D) decreases in the money supply

Question 19

When taxes increase,consumption decreases.How is this situation represented in the aggregate demand and aggregate supply model?

Accepted Answer

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

Question 20

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

Accepted Answer

A) when real wealth rises 
B) when the interest rate rises 
C) when the dollar appreciates 
D) when the expected price level rises 
A) when real wealth rises 
B) when the interest rate rises 
C) when the dollar appreciates 
D) when the expected price level rises

Why does a decrease in the price level induce an increase in the aggregate quantity of goods and services demanded?

What happens when the price level rises?

What happens when the price level falls?

How do prices change due to an economic contraction that is caused by a shift in aggregate demand?

Stagflation would result from the aggregate-supply curve shifting left.

Which of the following measures the overall price level?

Compare the effects of an aggregate-demand-induced recession with an aggregate-supply-induced recession.How would you recognize that a recession is induced by demand or supply? What policies would be appropriate in the first case and what in the second?

After a major flood destroyed an extended residential area in Calgary,what might have happened?

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

What happens when the price level rises?

What happens when the dollar depreciates?

Which of the following would make the price level decrease and real GDP increase?

All else equal,which of the following happens as the price level falls?

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

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

What are the recessions of the 1970s often most attributed to?

When taxes increase,consumption decreases.How is this situation represented in the aggregate demand and aggregate supply model?

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

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains from Trade

The Market Forces of Supply and Demand (PART 1)

The Market Forces of Supply and Demand (PART 2)

Measuring a Nation's 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 and 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

Why does a decrease in the price level induce an increase in the aggregate quantity of goods and services demanded?

What happens when the price level rises?

What happens when the price level falls?

How do prices change due to an economic contraction that is caused by a shift in aggregate demand?

Stagflation would result from the aggregate-supply curve shifting left.

Which of the following measures the overall price level?

Compare the effects of an aggregate-demand-induced recession with an aggregate-supply-induced recession.How would you recognize that a recession is induced by demand or supply? What policies would be appropriate in the first case and what in the second?

After a major flood destroyed an extended residential area in Calgary,what might have happened?

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

What happens when the price level rises?

What happens when the dollar depreciates?

Which of the following would make the price level decrease and real GDP increase?

All else equal,which of the following happens as the price level falls?

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

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

What are the recessions of the 1970s often most attributed to?

When taxes increase,consumption decreases.How is this situation represented in the aggregate demand and aggregate supply model?

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

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains from Trade

The Market Forces of Supply and Demand (PART 1)

The Market Forces of Supply and Demand (PART 2)

Measuring a Nation's 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 and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff between Inflation and Unemployment

Five Debates over Macroeconomic Policy

Filters