Question 1

What is the effect of bad weather for farming or some other temporary decrease in the availability of raw materials?

Accepted Answer

A) Aggregate supply shifts right. 
B) Output falls in the short run. 
C) Prices fall in the short run. 
D) Long-run aggregate supply shifts to the left. 
A) Aggregate supply shifts right. 
B) Output falls in the short run. 
C) Prices fall in the short run. 
D) Long-run aggregate supply shifts to the left.

Question 2

Suppose the economy was in long-run equilibrium when a sudden decline in the stock market took place.What happens in the short run after the decline in the stock market?

Accepted Answer

A) Both the price level and real GDP rise. 
B) The price level falls and real GDP does not change. 
C) The price level does not change and real GDP falls. 
D) Both the price level and real GDP fall. 
A) Both the price level and real GDP rise. 
B) The price level falls and real GDP does not change. 
C) The price level does not change and real GDP falls. 
D) Both the price level and real GDP fall.

Question 3

What happens to sales and profit during recessions?

Accepted Answer

A) sales and profits fall 
B) sales and profits rise 
C) sales rise and profits fall 
D) profits fall and sales rise 
A) sales and profits fall 
B) sales and profits rise 
C) sales rise and profits fall 
D) profits fall and sales rise

Question 4

Like real GDP,investment fluctuates,but investment fluctuates by a larger percentage.

Accepted Answer

A) True 
 B)False

Question 5

What are the effects of an increase in the price level?

Accepted Answer

A) People hold less money, so they lend less, and the interest rate rises. 
B) People hold less money, so they lend more, and the interest rate falls. 
C) People hold more money, so they lend more, and the interest rate falls. 
D) People hold more money, so they lend less, and the interest rate rises. 
A) People hold less money, so they lend less, and the interest rate rises. 
B) People hold less money, so they lend more, and the interest rate falls. 
C) People hold more money, so they lend more, and the interest rate falls. 
D) People hold more money, so they lend less, and the interest rate rises.

Question 6

In which of the following situations are people most likely to spend more?

Accepted Answer

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

Question 7

What are the effects of a decrease in the price level?

Accepted Answer

A) The real interest rate increases, the dollar appreciates, and net exports increase. 
B) The real interest rate increases, the dollar depreciates, and net exports decrease. 
C) The real interest rate decreases, the dollar depreciates, and net exports increase. 
D) The real interest rate decreases, the dollar appreciates, and net exports decrease. 
A) The real interest rate increases, the dollar appreciates, and net exports increase. 
B) The real interest rate increases, the dollar depreciates, and net exports decrease. 
C) The real interest rate decreases, the dollar depreciates, and net exports increase. 
D) The real interest rate decreases, the dollar appreciates, and net exports decrease.

Question 8

A decrease in the price level makes consumers feel wealthier,so they purchase more.This logic helps explain why the aggregate demand curve slopes downward.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following shifts aggregate demand to the right?

Accepted Answer

A) The federal government reduces purchases of new weapons. 
B) The Bank of Canada buys bonds in the open market. 
C) The price level falls. 
D) Net exports fall. 
A) The federal government reduces purchases of new weapons. 
B) The Bank of Canada buys bonds in the open market. 
C) The price level falls. 
D) Net exports fall.

Question 10

Figure 14-1
  
-Refer to the Figure 14-1.In the short run,which of the following would result from a favourable shift in aggregate supply?

Accepted Answer

A) It would move the economy from A to B. 
B) It would move the economy from B to C. 
C) It would move the economy from C to D. 
D) It would move the economy from D to A. 
A) It would move the economy from A to B. 
B) It would move the economy from B to C. 
C) It would move the economy from C to D. 
D) It would move the economy from D to A.

Question 11

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.Which of the following are consistent with the aggregate demand and aggregate supply theory?

Accepted Answer

A) The expected price level rises. Bargains are struck for higher increases in wages. 
B) The expected price level rises. Bargains are struck for lower increases in wages. 
C) The expected price level falls. Bargains are struck for higher increases in wages. 
D) The expected price level falls. Bargains are struck for lower increases in wages. 
A) The expected price level rises. Bargains are struck for higher increases in wages. 
B) The expected price level rises. Bargains are struck for lower increases in wages. 
C) The expected price level falls. Bargains are struck for higher increases in wages. 
D) The expected price level falls. Bargains are struck for lower increases in wages.

Question 12

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 13

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 14

How does Canadian aggregate demand change if the dollar appreciates or other countries experience recessions?

Accepted Answer

A) Aggregate demand shifts right. 
B) Aggregate demand shifts left. 
C) If the dollar appreciates, aggregate demand shifts right; if other countries experience recessions, aggregate demand shifts left. 
D) If the dollar appreciates, aggregate demand shifts left; if other countries experience recessions, aggregate demand shifts right. 
A) Aggregate demand shifts right. 
B) Aggregate demand shifts left. 
C) If the dollar appreciates, aggregate demand shifts right; if other countries experience recessions, aggregate demand shifts left. 
D) If the dollar appreciates, aggregate demand shifts left; if other countries experience recessions, aggregate demand shifts right.

Question 15

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

Accepted Answer

A) 25 percent 
B) 50 percent 
C) 60 percent 
D) 80 percent 
A) 25 percent 
B) 50 percent 
C) 60 percent 
D) 80 percent

Question 16

Figure 14-1
  
-Refer to the Figure 14-1.Which of the following paths indicates how the economy would move to long run equilibrium?

Accepted Answer

A) from A to B 
B) from C to B 
C) from D to C 
D) From C to A 
A) from A to B 
B) from C to B 
C) from D to C 
D) From C to A

Question 17

How are the effects of an increase in the price level that is greater than expected shown in the aggregate demand and aggregate supply model?

Accepted Answer

A) by shifting the short-run aggregate-supply curve right 
B) by shifting the short-run aggregate-supply curve left 
C) by moving to the right along a given aggregate-supply curve 
D) by moving to the left along a given aggregate-supply curve 
A) by shifting the short-run aggregate-supply curve right 
B) by shifting the short-run aggregate-supply curve left 
C) by moving to the right along a given aggregate-supply curve 
D) by moving to the left along a given aggregate-supply curve

Question 18

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

Accepted Answer

A) Dollars are worth more, so people spend more. 
B) Dollars are worth more, so people spend less. 
C) Dollars are worth less, so people spend more. 
D) Dollars are worth less, so people spend less. 
A) Dollars are worth more, so people spend more. 
B) Dollars are worth more, so people spend less. 
C) Dollars are worth less, so people spend more. 
D) Dollars are worth less, so people spend less.

Question 19

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

Accepted Answer

A) an increase in the price level 
B) an increase in the expected price level 
C) an increase in the capital stock 
D) an increase in interest rates 
A) an increase in the price level 
B) an increase in the expected price level 
C) an increase in the capital stock 
D) an increase in interest rates

Question 20

Which of the following government actions will shift the aggregate demand left?

Accepted Answer

A) a decrease in taxes 
B) cuts in military expenditures 
C) signing a free trade agreement 
D) repealing an import tariff 
A) a decrease in taxes 
B) cuts in military expenditures 
C) signing a free trade agreement 
D) repealing an import tariff

What is the effect of bad weather for farming or some other temporary decrease in the availability of raw materials?

Suppose the economy was in long-run equilibrium when a sudden decline in the stock market took place.What happens in the short run after the decline in the stock market?

What happens to sales and profit during recessions?

Like real GDP,investment fluctuates,but investment fluctuates by a larger percentage.

What are the effects of an increase in the price level?

In which of the following situations are people most likely to spend more?

What are the effects of a decrease in the price level?

A decrease in the price level makes consumers feel wealthier,so they purchase more.This logic helps explain why the aggregate demand curve slopes downward.

Which of the following shifts aggregate demand to the right?

Figure 14-1 -Refer to the Figure 14-1.In the short run,which of the following would result from a favourable shift in aggregate supply?

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

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

How does Canadian aggregate demand change if the dollar appreciates or other countries experience recessions?

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

Figure 14-1 -Refer to the Figure 14-1.Which of the following paths indicates how the economy would move to long run equilibrium?

How are the effects of an increase in the price level that is greater than expected shown in the aggregate demand and aggregate supply model?

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

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

Which of the following government actions will shift the aggregate demand left?

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 is the effect of bad weather for farming or some other temporary decrease in the availability of raw materials?

Suppose the economy was in long-run equilibrium when a sudden decline in the stock market took place.What happens in the short run after the decline in the stock market?

What happens to sales and profit during recessions?

Like real GDP,investment fluctuates,but investment fluctuates by a larger percentage.

What are the effects of an increase in the price level?

In which of the following situations are people most likely to spend more?

What are the effects of a decrease in the price level?

A decrease in the price level makes consumers feel wealthier,so they purchase more.This logic helps explain why the aggregate demand curve slopes downward.

Which of the following shifts aggregate demand to the right?

Figure 14-1 -Refer to the Figure 14-1.In the short run,which of the following would result from a favourable shift in aggregate supply?

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

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

How does Canadian aggregate demand change if the dollar appreciates or other countries experience recessions?

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

Figure 14-1 -Refer to the Figure 14-1.Which of the following paths indicates how the economy would move to long run equilibrium?

How are the effects of an increase in the price level that is greater than expected shown in the aggregate demand and aggregate supply model?

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

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

Which of the following government actions will shift the aggregate demand left?

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