Question 1

After a major flood destroyed a large 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 2

What has NOT been suggested as a cause of the Great Depression?

Accepted Answer

A)  rapidly rising asset prices 
B)  a decline in Canadian exports 
C)  a decrease in stock prices 
D)  the collapse of the banking system 
A)  rapidly rising asset prices 
B)  a decline in Canadian exports 
C)  a decrease in stock prices 
D)  the collapse of the banking system

Question 3

Suppose a stock market crash makes people feel less wealthy. 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 4

An increase in the price level makes consumers feel less wealthy. How is this situation represented?

Accepted Answer

A)  Aggregate demand shifts right. 
B)  Aggregate demand shifts left. 
C)  There is a movement to right along a given aggregate-demand curve. 
D)  There is a movement to the left along a given aggregate-demand curve. 
A)  Aggregate demand shifts right. 
B)  Aggregate demand shifts left. 
C)  There is a movement to right along a given aggregate-demand curve. 
D)  There is a movement to the left along a given aggregate-demand curve.

Question 5

What changes are likely to happen in an economy when production costs rise?

Accepted Answer

A)  Output and prices rise. 
B)  Output rises and prices fall. 
C)  Output falls and prices rise. 
D)  Output and prices fall. 
A)  Output and prices rise. 
B)  Output rises and prices fall. 
C)  Output falls and prices rise. 
D)  Output and prices fall.

Question 6

Make a list of expenditures whose sum equals GDP.

Accepted Answer

consumption, investm

Question 7

What does the downward slope of the aggregate-demand curve show?

Accepted Answer

A)  that an increase in the money supply causes the aggregate quantity of goods and services demanded to increase 
B)  that an increase in the money supply causes the aggregate quantity of goods and services demanded to decrease 
C)  that an increase in the price level causes the aggregate quantity of goods and services demanded to increase 
D)  that an increase in the price level causes the aggregate quantity of goods and services demanded to decrease 
A)  that an increase in the money supply causes the aggregate quantity of goods and services demanded to increase 
B)  that an increase in the money supply causes the aggregate quantity of goods and services demanded to decrease 
C)  that an increase in the price level causes the aggregate quantity of goods and services demanded to increase 
D)  that an increase in the price level causes the aggregate quantity of goods and services demanded to decrease

Question 8

Suppose there was an economic contraction caused by a shift in aggregate supply. Further, suppose the central bank changes the money supply to offset the effects of that contraction. How would the effects of the change in money supply be reflected in the aggregate demand and aggregate supply model?

Accepted Answer

A)  aggregate supply would shift to the right. 
B)  Aggregate supply would shift to the left. 
C)  Aggregate demand would shift to the right. 
D)  Aggregate demand would shift to the left. 
A)  aggregate supply would shift to the right. 
B)  Aggregate supply would shift to the left. 
C)  Aggregate demand would shift to the right. 
D)  Aggregate demand would shift to the left.

Question 9

Suppose the economy is initially in long-run equilibrium. Which statement best describes the state of the economy after an increase in aggregate demand?

Accepted Answer

A)  Prices and output are higher. 
B)  Prices and output are lower. 
C)  Prices are higher and output is the same. 
D)  Prices are the same and output is lower. 
A)  Prices and output are higher. 
B)  Prices and output are lower. 
C)  Prices are higher and output is the same. 
D)  Prices are the same and output is lower.

Question 10

Illustrate the classical analysis of growth and inflation with aggregate-demand and long-run aggregate-supply curves.

Accepted Answer

See graph.
@#IMG-DLM& @#IMG-DLM&
Over time, technological ad

Question 11

What are the variables on the vertical and horizontal axes of the aggregate supply and demand curve?

Accepted Answer

A)  the price level and real output 
B)  real output and employment 
C)  unemployment and the inflation rate 
D)  inflation rate and the price level 
A)  the price level and real output 
B)  real output and employment 
C)  unemployment and the inflation rate 
D)  inflation rate and the price level

Question 12

What has been suggested as a cause of the Great Depression?

Accepted Answer

A)  a decline in output 
B)  a decrease in prices 
C)  strong bank regulations 
D)  a fall in net exports 
A)  a decline in output 
B)  a decrease in prices 
C)  strong bank regulations 
D)  a fall in net exports

Question 13

Which statement best 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 14

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

Accepted Answer

A) True 
 B)False

Question 15

Scenario 14-2
The economy is in long-run equilibrium. Suddenly, due to corporate scandals, a recession experienced by a major trading partner, 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 statement is 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 16

What typically rises during a recession?

Accepted Answer

A)  the price level 
B)  unemployment 
C)  corporate profits 
D)  automobile sales 
A)  the price level 
B)  unemployment 
C)  corporate profits 
D)  automobile sales

Question 17

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

Accepted Answer

A)  if the government were to increase the minimum-wage 
B)  if the government were to make unemployment benefits more generous 
C)  if the government were to raise taxes on investment spending 
D)  if the government were to increase immigration 
A)  if the government were to increase the minimum-wage 
B)  if the government were to make unemployment benefits more generous 
C)  if the government were to raise taxes on investment spending 
D)  if the government were to increase immigration

Question 18

A change in the money supply changes only nominal variables in the long run.

Accepted Answer

A) True 
 B)False

Question 19

Which statement best describes the aggregate demand and aggregate supply model?

Accepted Answer

A)  Aggregate supply adjusts to equate aggregate demand at the prevailing market prices. 
B)  The price level adjusts to equate aggregate demand to aggregate supply. 
C)  Aggregate demand adjusts to equate aggregate supply at the prevailing market prices. 
D)  Both aggregate demand and supply adjust to become equal at the prevailing market prices. 
A)  Aggregate supply adjusts to equate aggregate demand at the prevailing market prices. 
B)  The price level adjusts to equate aggregate demand to aggregate supply. 
C)  Aggregate demand adjusts to equate aggregate supply at the prevailing market prices. 
D)  Both aggregate demand and supply adjust to become equal at the prevailing market prices.

Question 20

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 elas

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

What has NOT been suggested as a cause of the Great Depression?

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

An increase in the price level makes consumers feel less wealthy. How is this situation represented?

What changes are likely to happen in an economy when production costs rise?

Make a list of expenditures whose sum equals GDP.

What does the downward slope of the aggregate-demand curve show?

Suppose there was an economic contraction caused by a shift in aggregate supply. Further, suppose the central bank changes the money supply to offset the effects of that contraction. How would the effects of the change in money supply be reflected in the aggregate demand and aggregate supply model?

Suppose the economy is initially in long-run equilibrium. Which statement best describes the state of the economy after an increase in aggregate demand?

Illustrate the classical analysis of growth and inflation with aggregate-demand and long-run aggregate-supply curves.

What are the variables on the vertical and horizontal axes of the aggregate supply and demand curve?

What has been suggested as a cause of the Great Depression?

Which statement best explains the downward slope of the aggregate-demand curve?

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

What typically rises during a recession?

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

A change in the money supply changes only nominal variables in the long run.

Which statement best describes the aggregate demand and aggregate supply model?

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

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

What has NOT been suggested as a cause of the Great Depression?

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

An increase in the price level makes consumers feel less wealthy. How is this situation represented?

What changes are likely to happen in an economy when production costs rise?

Make a list of expenditures whose sum equals GDP.

What does the downward slope of the aggregate-demand curve show?

Suppose there was an economic contraction caused by a shift in aggregate supply. Further, suppose the central bank changes the money supply to offset the effects of that contraction. How would the effects of the change in money supply be reflected in the aggregate demand and aggregate supply model?

Suppose the economy is initially in long-run equilibrium. Which statement best describes the state of the economy after an increase in aggregate demand?

Illustrate the classical analysis of growth and inflation with aggregate-demand and long-run aggregate-supply curves.

What are the variables on the vertical and horizontal axes of the aggregate supply and demand curve?

What has been suggested as a cause of the Great Depression?

Which statement best explains the downward slope of the aggregate-demand curve?

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

What typically rises during a recession?

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

A change in the money supply changes only nominal variables in the long run.

Which statement best describes the aggregate demand and aggregate supply model?

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