Question 1

What happens when the dollar appreciates?

Accepted Answer

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

Question 2

Which of the following 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 3

Other things the same,a decrease in the price level makes the interest rate increase,which leads to an appreciation of the dollar in the foreign-currency exchange.

Accepted Answer

A) True 
 B)False

Question 4

Because not all prices adjust instantly to changing conditions,an unexpected fall in the price level leaves some firms with higher-than-desired prices,and these higher-than-desired prices depress sales and induce firms to reduce the quantity of goods and services they produce.

Accepted Answer

A) True 
 B)False

Question 5

Make a list of expenditures whose sum equals GDP.

Accepted Answer

consumption,investme

Question 6

The long-run trend in real GDP is upward.How is this possible given business cycles? What explains the upward trend?

Accepted Answer

There are occasional short-lived periods

Question 7

Which of the following happens during recessions?

Accepted Answer

A) Firms produce less but invest more. 
B) Firms have to increase production because of falling prices. 
C) Incomes increase because workers have to work overtime. 
D) Many workers are laid off. 
A) Firms produce less but invest more. 
B) Firms have to increase production because of falling prices. 
C) Incomes increase because workers have to work overtime. 
D) Many workers are laid off.

Question 8

In 1986,OPEC countries increased their production of oil.What was the result?

Accepted Answer

A) The price level rose. 
B) Aggregate supply shifted right. 
C) Unemployment rose. 
D) Stagflation occurred. 
A) The price level rose. 
B) Aggregate supply shifted right. 
C) Unemployment rose. 
D) Stagflation occurred.

Question 9

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

Accepted Answer

A) an increase in the actual price level 
B) an increase in the expected price level 
C) an increase in the capital stock 
D) an increase in money supply 
A) an increase in the actual price level 
B) an increase in the expected price level 
C) an increase in the capital stock 
D) an increase in money supply

Question 10

According to misperceptions theory,if a firm thought that inflation was going to be 5 percent and actual inflation was 6 percent,how may the firm be affected?

Accepted Answer

A) It may believe that the relative price has increased, so it would increase production. 
B) It may believe that the relative price has increased, so it would decrease production. 
C) It may believe that the relative price has decreased, so it would increase production. 
D) It may believe that the relative price has decreased, so it would decrease production. 
A) It may believe that the relative price has increased, so it would increase production. 
B) It may believe that the relative price has increased, so it would decrease production. 
C) It may believe that the relative price has decreased, so it would increase production. 
D) It may believe that the relative price has decreased, so it would decrease production.

Question 11

Suppose there is a decrease in the availability of an important major resource,such as oil.Which of the following shifts 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 12

When the government spends more,what is the initial effect?

Accepted Answer

A) Aggregate demand shifts right. 
B) Aggregate demand shifts left. 
C) Aggregate supply shifts right. 
D) Aggregate supply shifts left. 
A) Aggregate demand shifts right. 
B) Aggregate demand shifts left. 
C) Aggregate supply shifts right. 
D) Aggregate supply shifts left.

Question 13

Which of the following typically rises during a recession?

Accepted Answer

A) garbage collection 
B) unemployment 
C) corporate profits 
D) automobile sales 
A) garbage collection 
B) unemployment 
C) corporate profits 
D) automobile sales

Question 14

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

Accepted Answer

A) 6 percent, 0 percent 
B) 3 percent, 20 percent 
C) -1 percent, 6 percent 
D) -3 percent, 2 percent 
A) 6 percent, 0 percent 
B) 3 percent, 20 percent 
C) -1 percent, 6 percent 
D) -3 percent, 2 percent

Question 15

Which of the following terms refers to a short period of falling incomes and rising unemployment?

Accepted Answer

A) depression 
B) recession 
C) expansion 
D) business cycle 
A) depression 
B) recession 
C) expansion 
D) business cycle

Question 16

Consider the short-run aggregate-supply curve in the following graph.
   
a. Calculate approximately the elasticities of the curve at two price levels, P = 20 and P = 100. (Hint: The price elasticity formula is EP = percentage change in Y / percentage change in P.)
b. Explain the meaning of the elasticity in the context of the AS curve.
c. Compare the two elasticities found in (a) and discuss the results.

Accepted Answer

a.An easier way of calculating the elast

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.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 18

Pessimism about the future leads to falling prices and rising unemployment.

Accepted Answer

A) True 
 B)False

Question 19

Figure 14-1
  
-Refer to the Figure 14-1.How would an increase in the money supply move the economy in the short and long run?

Accepted Answer

A) from C to B in the short run and the long run 
B) from C to D in the short run and the long run 
C) from C to B in the short run and to A in the long run 
D) from C to D in the short run and back to C in the long run 
A) from C to B in the short run and the long run 
B) from C to D in the short run and the long run 
C) from C to B in the short run and to A in the long run 
D) from C to D in the short run and back to C in the long run

Question 20

What was the main reason for the economic boom of the early 1940s?

Accepted Answer

A) increased government expenditures 
B) falling prices of oil and other natural resources 
C) an increase in the growth rate of the money supply 
D) rapid developments in transportation, electronics, and communication 
A) increased government expenditures 
B) falling prices of oil and other natural resources 
C) an increase in the growth rate of the money supply 
D) rapid developments in transportation, electronics, and communication

What happens when the dollar appreciates?

Which of the following explains the downward slope of the aggregate-demand curve?

Other things the same,a decrease in the price level makes the interest rate increase,which leads to an appreciation of the dollar in the foreign-currency exchange.

Because not all prices adjust instantly to changing conditions,an unexpected fall in the price level leaves some firms with higher-than-desired prices,and these higher-than-desired prices depress sales and induce firms to reduce the quantity of goods and services they produce.

Make a list of expenditures whose sum equals GDP.

The long-run trend in real GDP is upward.How is this possible given business cycles? What explains the upward trend?

Which of the following happens during recessions?

In 1986,OPEC countries increased their production of oil.What was the result?

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

According to misperceptions theory,if a firm thought that inflation was going to be 5 percent and actual inflation was 6 percent,how may the firm be affected?

Suppose there is a decrease in the availability of an important major resource,such as oil.Which of the following shifts would most likely occur?

When the government spends more,what is the initial effect?

Which of the following typically rises during a recession?

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

Which of the following terms refers to a short period of falling incomes and rising unemployment?

Pessimism about the future leads to falling prices and rising unemployment.

Figure 14-1 -Refer to the Figure 14-1.How would an increase in the money supply move the economy in the short and long run?

What was the main reason for the economic boom of the early 1940s?

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

What happens when the dollar appreciates?

Which of the following explains the downward slope of the aggregate-demand curve?

Other things the same,a decrease in the price level makes the interest rate increase,which leads to an appreciation of the dollar in the foreign-currency exchange.

Because not all prices adjust instantly to changing conditions,an unexpected fall in the price level leaves some firms with higher-than-desired prices,and these higher-than-desired prices depress sales and induce firms to reduce the quantity of goods and services they produce.

Make a list of expenditures whose sum equals GDP.

The long-run trend in real GDP is upward.How is this possible given business cycles? What explains the upward trend?

Which of the following happens during recessions?

In 1986,OPEC countries increased their production of oil.What was the result?

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

According to misperceptions theory,if a firm thought that inflation was going to be 5 percent and actual inflation was 6 percent,how may the firm be affected?

Suppose there is a decrease in the availability of an important major resource,such as oil.Which of the following shifts would most likely occur?

When the government spends more,what is the initial effect?

Which of the following typically rises during a recession?

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

Which of the following terms refers to a short period of falling incomes and rising unemployment?

Pessimism about the future leads to falling prices and rising unemployment.

Figure 14-1 -Refer to the Figure 14-1.How would an increase in the money supply move the economy in the short and long run?

What was the main reason for the economic boom of the early 1940s?

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