Question 1

What has been suggested as a reason for the severity of the Great Depression?

Accepted Answer

A)  a decline in output 
B)  a decrease in prices 
C)  a large increase in the money supply 
D)  the lack of a central bank in Canada 
A)  a decline in output 
B)  a decrease in prices 
C)  a large increase in the money supply 
D)  the lack of a central bank in Canada

Question 2

Increased uncertainty and pessimism about the future of the economy decreases investment spending, shifting aggregate demand to the left.

Accepted Answer

A) True 
 B)False

Question 3

Which statement best describes the beginning of a recession?

Accepted Answer

A)  Production and unemployment both rise. 
B)  Production rises and unemployment falls. 
C)  Production falls and unemployment rises. 
D)  Production and unemployment both fall. 
A)  Production and unemployment both rise. 
B)  Production rises and unemployment falls. 
C)  Production falls and unemployment rises. 
D)  Production and unemployment both fall.

Question 4

Because we understand what things change GDP, we can predict recessions with a fair amount of accuracy.

Accepted Answer

A) True 
 B)False

Question 5

What is the effect of increases in the capital stock and in the money supply on prices in the long run?

Accepted Answer

A)  Both make the price level rise. 
B)  Both make the price level fall. 
C)  Increases in the capital stock make the price level rise, while increases in the money supply make prices fall. 
D)  Increases in the capital stock make the price level fall, while increases in the money supply make prices rise. 
A)  Both make the price level rise. 
B)  Both make the price level fall. 
C)  Increases in the capital stock make the price level rise, while increases in the money supply make prices fall. 
D)  Increases in the capital stock make the price level fall, while increases in the money supply make prices rise.

Question 6

Make a list of things that would shift the aggregate-demand curve to the right.

Accepted Answer

Examples (and variations on examples)
in

Question 7

The explanations for the slopes of the aggregate-demand and aggregate-supply curves are the same as the explanations for the slope of demand and supply curves for specific goods and services.

Accepted Answer

A) True 
 B)False

Question 8

Which statement best describes what happens when the price level falls?

Accepted Answer

A)  Households increase foreign bond purchases, and the supply of dollars increases. 
B)  Households increase foreign bond purchases, and the supply of dollars decreases. 
C)  Households decrease foreign bond purchases, and the supply of dollars increases. 
D)  Households decrease foreign bond purchases, and the supply of dollars decreases. 
A)  Households increase foreign bond purchases, and the supply of dollars increases. 
B)  Households increase foreign bond purchases, and the supply of dollars decreases. 
C)  Households decrease foreign bond purchases, and the supply of dollars increases. 
D)  Households decrease foreign bond purchases, and the supply of dollars decreases.

Question 9

What did NOT happen during the onset of the Great Depression?

Accepted Answer

A)  The money supply fell as households took money out of banks. 
B)  The Bank of Canada decreased the bank rate. 
C)  The real GDP per person fell about 30 percent. 
D)  Bankers began holding greater reserves. 
A)  The money supply fell as households took money out of banks. 
B)  The Bank of Canada decreased the bank rate. 
C)  The real GDP per person fell about 30 percent. 
D)  Bankers began holding greater reserves.

Question 10

In which situation would the long-run aggregate-supply curve shift right?

Accepted Answer

A)  if technology improves 
B)  if the price level decreases 
C)  if the price of oil increases 
D)  if the money supply increases 
A)  if technology improves 
B)  if the price level decreases 
C)  if the price of oil increases 
D)  if the money supply increases

Question 11

According to misperceptions theory, if a firm thought that inflation was going to be 5 percent and actual inflation was 4 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 12

Figure 14-1

-Refer to the Figure 14-1. If the economy starts at A and moves to D, what happens to the economy in the long run?

Accepted Answer

A)  It moves to C and then to A. 
B)  It moves to B and then to A. 
C)  It moves to C. 
D)  It moves to A. 
A)  It moves to C and then to A. 
B)  It moves to B and then to A. 
C)  It moves to C. 
D)  It moves to A.

Question 13

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 14

Most economists believe that classical theory explains the world in the short run, but not the long run.

Accepted Answer

A) True 
 B)False

Question 15

An aggregate-supply curve is described by the equation Y=80 + 0.5P. The expected price level is 100. How much is the long-run level of output?

Accepted Answer

The standard form of a short-run aggrega

Question 16

Which government action will shift the aggregate demand right?

Accepted Answer

A)  a rise in personal income taxes 
B)  increases in military expenditures 
C)  a repeal of an investment tax credit 
D)  closing up a military facility to reduce costs 
A)  a rise in personal income taxes 
B)  increases in military expenditures 
C)  a repeal of an investment tax credit 
D)  closing up a military facility to reduce costs

What has been suggested as a reason for the severity of the Great Depression?

Increased uncertainty and pessimism about the future of the economy decreases investment spending, shifting aggregate demand to the left.

Which statement best describes the beginning of a recession?

Because we understand what things change GDP, we can predict recessions with a fair amount of accuracy.

What is the effect of increases in the capital stock and in the money supply on prices in the long run?

Make a list of things that would shift the aggregate-demand curve to the right.

The explanations for the slopes of the aggregate-demand and aggregate-supply curves are the same as the explanations for the slope of demand and supply curves for specific goods and services.

Which statement best describes what happens when the price level falls?

What did NOT happen during the onset of the Great Depression?

In which situation would the long-run aggregate-supply curve shift right?

According to misperceptions theory, if a firm thought that inflation was going to be 5 percent and actual inflation was 4 percent, how may the firm be affected?

Figure 14-1 -Refer to the Figure 14-1. If the economy starts at A and moves to D, what happens to the economy in the long run?

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

Most economists believe that classical theory explains the world in the short run, but not the long run.

An aggregate-supply curve is described by the equation Y=80 + 0.5P. The expected price level is 100. How much is the long-run level of output?

Which government action will shift the aggregate demand right?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations 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 has been suggested as a reason for the severity of the Great Depression?

Increased uncertainty and pessimism about the future of the economy decreases investment spending, shifting aggregate demand to the left.

Which statement best describes the beginning of a recession?

Because we understand what things change GDP, we can predict recessions with a fair amount of accuracy.

What is the effect of increases in the capital stock and in the money supply on prices in the long run?

Make a list of things that would shift the aggregate-demand curve to the right.

The explanations for the slopes of the aggregate-demand and aggregate-supply curves are the same as the explanations for the slope of demand and supply curves for specific goods and services.

Which statement best describes what happens when the price level falls?

What did NOT happen during the onset of the Great Depression?

In which situation would the long-run aggregate-supply curve shift right?

According to misperceptions theory, if a firm thought that inflation was going to be 5 percent and actual inflation was 4 percent, how may the firm be affected?

Figure 14-1 -Refer to the Figure 14-1. If the economy starts at A and moves to D, what happens to the economy in the long run?

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

Most economists believe that classical theory explains the world in the short run, but not the long run.

An aggregate-supply curve is described by the equation Y=80 + 0.5P. The expected price level is 100. How much is the long-run level of output?

Which government action will shift the aggregate demand right?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations 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