Exam 11: The Is-Mp Model: Adding Inflation and the Open Economy
Exam 1: Introduction to Macroeconomics and the Great Recession68 Questions
Exam 2: Measuring the Macroeconomy78 Questions
Exam 3: The Canadian Financial System83 Questions
Exam 4: Money and Inflation80 Questions
Exam 5: The Global Financial System and Exchange Rates81 Questions
Exam 6: The Labour Market77 Questions
Exam 7: The Standard of Living Over Time and Across Countries74 Questions
Exam 8: Long-Run Economic Growth85 Questions
Exam 9: Business Cycles92 Questions
Exam 10: Explaining Aggregate Demand: the Is-Mp Model94 Questions
Exam 11: The Is-Mp Model: Adding Inflation and the Open Economy74 Questions
Exam 12: Monetary Policy in the Short Run83 Questions
Exam 13: Fiscal Policy in the Short Run77 Questions
Exam 14: Aggregate Demand, aggregate Supply, and Monetary Policy75 Questions
Exam 15: Fiscal Policy and the Government Budget in the Long Run55 Questions
Exam 16: Consumption and Investment74 Questions
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Figure 11.1
-Refer to Figure 11.1...Assume the economy is in equilibrium at Ȳ₁ = 0.Other things equal,a negative demand shock such as the Great Recession would result in a movement from point ________ to point ________.

(Multiple Choice)
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Figure 11.1
-Refer to Figure 11.1..Assume the economy is in equilibrium at Ȳ₁ = 0.Other things equal,a surge in household wealth will result in a movement from point ________ to point ________.

(Multiple Choice)
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The financial market shock that occurred during the Great Recession increased the default-risk premium,and the housing shock that also occurred during the recession reduced wealth and residential construction.These two events would result in
(Multiple Choice)
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When the Phillips curve was viewed as a structural relationship,it was believed that the central bank could
(Multiple Choice)
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If the inflation rate in 2013 was 2.5%,and because of that people expect the inflation rate in 2014 will also be 2.5%,these people are said to have
(Multiple Choice)
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The oil shock of 2007-2008 saw the price of oil rising from less than $60 a barrel in March 2007 to over $145 a barrel in July 2008,and decreasing again to just over $30 a barrel in December 2008.Assuming the economy was at potential GDP prior to the oil shock,the decrease in the price of oil,such as what occurred between July 2008 and December 2008,acts as a positive supply shock,resulting in
(Multiple Choice)
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Under a fixed exchange rate system,at high domestic real interest rates net capital outflows are ________,so the central bank ________ foreign-exchange reserves.
(Multiple Choice)
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The oil shock of 2007-2008 saw the price of oil rising from less than $60 a barrel in March 2007 to over $145 a barrel in July 2008,and decreasing again to just over $30 a barrel in December 2008.Assuming the economy was at potential GDP prior to the oil shock,the decrease in the price of oil,such as what occurred between July 2008 and December 2008,acts as a positive supply shock,causing the inflation rate to ________ and the output gap to ________.
(Multiple Choice)
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Under a fixed exchange rate system,at high domestic real interest rates the demand for domestic currency ________,so the central bank ________ foreign-exchange reserves.
(Multiple Choice)
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Under a fixed exchange rate system,if the government decides to devalue its currency,net exports will ________ and the IS curve will shift to the ________.
(Multiple Choice)
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Figure 11.2
-Refer to Figure 11.2..Assume the economy is in equilibrium at Ȳ₁,where real GDP equals potential GDP,and then the economy experiences a positive demand shock.Other things equal,the positive demand shock is best represented by a(n)

(Multiple Choice)
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Assume the economy is in equilibrium at ??= 0,where real GDP equals potential GDP,and the economy experiences a positive demand shock.What policy could the Bank of Canada use to keep the inflation rate from rising? Use the IS-MP model and the Phillips curve to explain your answer.
(Essay)
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An increase in the real interest rate outside of Canada will ________ the demand for the dollar and ________ the demand for foreign financial assets.
(Multiple Choice)
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Figure 11.2
-Refer to Figure 11.2..Assume the economy is in equilibrium at Ȳ₁,where real GDP equals potential GDP.The economy experiences a negative demand shock,and the Bank of Canada responds by decreasing real interest rates to bring real GDP and inflation back to their original levels.Other things equal,the Bank of Canada's response following the negative demand shock is best represented by a(n)

(Multiple Choice)
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An increase in the real interest rate outside of Canada will cause net capital outflows to ________ and cause the dollar to ________ relative to other currencies.
(Multiple Choice)
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A decrease in the unemployment rate that is accompanied by an decrease in the inflation rate is represented by a(n)________ the Phillips curve.
(Multiple Choice)
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Once economists take into consideration changes in the expected inflation rate and supply shocks,the Phillips curve
(Multiple Choice)
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Suppose the economy is in equilibrium with an output gap equal to zero and the actual inflation rate equals the expected inflation rate.If the economy experiences a negative demand shock,real GDP will become ________ potential GDP and the economy will move to the ________ along an existing Phillips curve.
(Multiple Choice)
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Under a fixed exchange rate system,at low domestic real interest rates the demand for domestic currency ________,so the central bank ________ foreign-exchange reserves.
(Multiple Choice)
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A decrease in the unemployment rate that is accompanied by an increase in the inflation rate is represented by a ________ the Phillips curve.
(Multiple Choice)
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