Question 1

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 2

All explanations for the upward slope of the short-run aggregate-supply curve suppose that output supplied increases when the price level increases more than expected.

Accepted Answer

A) True 
 B)False

Question 3

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 4

Which statement best characterizes the aggregate-demand curve?

Accepted Answer

A)  It slopes downward because higher prices cause the exchange rate to depreciate. 
B)  It slopes downward because higher prices cause real wealth to decrease and interest rates to increase. 
C)  It slopes upward because higher prices cause people to increase their production. 
D)  It slopes upward because higher prices cause real wealth to increase and interest rates to decrease. 
A)  It slopes downward because higher prices cause the exchange rate to depreciate. 
B)  It slopes downward because higher prices cause real wealth to decrease and interest rates to increase. 
C)  It slopes upward because higher prices cause people to increase their production. 
D)  It slopes upward because higher prices cause real wealth to increase and interest rates to decrease.

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

Which relationship does the model of aggregate demand and aggregate supply explain?

Accepted Answer

A)  the relationship between the price and quantity of a particular good 
B)  the relationship between the interest rate and output 
C)  the relationship between wages and employment 
D)  the relationship between real GDP and the price level 
A)  the relationship between the price and quantity of a particular good 
B)  the relationship between the interest rate and output 
C)  the relationship between wages and employment 
D)  the relationship between real GDP and the price level

Question 7

Which expenditure item is responsible for the decrease in real GDP during a recession?

Accepted Answer

A)  mostly investment spending 
B)  mostly consumption spending 
C)  mostly government spending 
D)  mostly exports 
A)  mostly investment spending 
B)  mostly consumption spending 
C)  mostly government spending 
D)  mostly exports

Question 8

What does real GDP measure?

Accepted Answer

A)  the dollar value of all goods 
B)  economic activity and income 
C)  primarily long-run trends 
D)  profitability of all companies in the economy 
A)  the dollar value of all goods 
B)  economic activity and income 
C)  primarily long-run trends 
D)  profitability of all companies in the economy

Question 9

Suppose the economy is in long-run equilibrium. If there is a tax cut at the same time that major new sources of oil are discovered in the country, what would we expect will happen in the short run?

Accepted Answer

A)  Real GDP will rise, and the price level might rise, fall, or stay the same. 
B)  Real GDP will fall, and the price level might rise, fall, or stay the same. 
C)  The price level will rise, and real GDP might rise, fall, or stay the same. 
D)  The price level will fall, and real GDP might rise, fall, or stay the same. 
A)  Real GDP will rise, and the price level might rise, fall, or stay the same. 
B)  Real GDP will fall, and the price level might rise, fall, or stay the same. 
C)  The price level will rise, and real GDP might rise, fall, or stay the same. 
D)  The price level will fall, and real GDP might rise, fall, or stay the same.

Question 10

What happened during World War II?

Accepted Answer

A)  Government purchases of goods and services increased. 
B)  The real GDP per person decreased by 60 percent. 
C)  The unemployment rate increased to 15 percent. 
D)  More resources were devoted to the production of consumer goods. 
A)  Government purchases of goods and services increased. 
B)  The real GDP per person decreased by 60 percent. 
C)  The unemployment rate increased to 15 percent. 
D)  More resources were devoted to the production of consumer goods.

Question 11

When would the long-run aggregate-supply curve shift right?

Accepted Answer

A)  when immigration increases or the government makes a substantial increase in the minimum wage 
B)  when immigration decreases or the government abolishes the minimum wage 
C)  when immigration increases or the government abolishes the minimum wage 
D)  when immigration decreases or the government makes a substantial increase in the minimum wage 
A)  when immigration increases or the government makes a substantial increase in the minimum wage 
B)  when immigration decreases or the government abolishes the minimum wage 
C)  when immigration increases or the government abolishes the minimum wage 
D)  when immigration decreases or the government makes a substantial increase in the minimum wage

Question 12

What happens when the dollar depreciates?

Accepted Answer

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

Question 13

Suppose there is a decrease in the availability of an important major resource, such as oil. Which shift 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 14

In addition to the price level, what does the aggregate demand and aggregate supply model focus on?

Accepted Answer

A)  real GDP 
B)  nominal GDP 
C)  the real interest rate 
D)  stock prices 
A)  real GDP 
B)  nominal GDP 
C)  the real interest rate 
D)  stock prices

Question 15

What does a fall in the economy's overall level of prices tend to do?

Accepted Answer

A)  It tends to raise both the quantity demanded and supplied of goods and services. 
B)  It tends to raise the quantity demanded of goods and services, but lower the quantity supplied. 
C)  It tends to lower the quantity demanded of goods and services, but raise the quantity supplied. 
D)  It tends to lower both the quantity demanded and the quantity supplied of goods and services. 
A)  It tends to raise both the quantity demanded and supplied of goods and services. 
B)  It tends to raise the quantity demanded of goods and services, but lower the quantity supplied. 
C)  It tends to lower the quantity demanded of goods and services, but raise the quantity supplied. 
D)  It tends to lower both the quantity demanded and the quantity supplied of goods and services.

Question 16

What does a rise in the economy's overall level of prices tend to do?

Accepted Answer

A)  It tends to raise both the quantity demanded and supplied of goods and services. 
B)  It tends to raise the quantity demanded of goods and services but lower the quantity supplied. 
C)  It tends to lower the quantity demanded of goods and services but raise the quantity supplied. 
D)  It tends to lower both the quantity demanded and the quantity supplied of goods and services. 
A)  It tends to raise both the quantity demanded and supplied of goods and services. 
B)  It tends to raise the quantity demanded of goods and services but lower the quantity supplied. 
C)  It tends to lower the quantity demanded of goods and services but raise the quantity supplied. 
D)  It tends to lower both the quantity demanded and the quantity supplied of goods and services.

Question 17

Which statement characterizes business cycles?

Accepted Answer

A)  They are predictable fluctuations in consumption. 
B)  They are no longer very important due to government policy. 
C)  They are fluctuations in real GDP and related variables over time. 
D)  They are easily predicted by competent economists. 
A)  They are predictable fluctuations in consumption. 
B)  They are no longer very important due to government policy. 
C)  They are fluctuations in real GDP and related variables over time. 
D)  They are easily predicted by competent economists.

Question 18

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 19

Economists mostly agree that the Great Depression was the result of a very large adverse supply shock.

Accepted Answer

A) True 
 B)False

Question 20

Figure 14-1

-Refer to the Figure 14-1. In the short run, what 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.

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

All explanations for the upward slope of the short-run aggregate-supply curve suppose that output supplied increases when the price level increases more than expected.

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

Which statement best characterizes the aggregate-demand curve?

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

Which relationship does the model of aggregate demand and aggregate supply explain?

Which expenditure item is responsible for the decrease in real GDP during a recession?

What does real GDP measure?

Suppose the economy is in long-run equilibrium. If there is a tax cut at the same time that major new sources of oil are discovered in the country, what would we expect will happen in the short run?

What happened during World War II?

When would the long-run aggregate-supply curve shift right?

What happens when the dollar depreciates?

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

In addition to the price level, what does the aggregate demand and aggregate supply model focus on?

What does a fall in the economy's overall level of prices tend to do?

What does a rise in the economy's overall level of prices tend to do?

Which statement characterizes business cycles?

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.

Economists mostly agree that the Great Depression was the result of a very large adverse supply shock.

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

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

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

All explanations for the upward slope of the short-run aggregate-supply curve suppose that output supplied increases when the price level increases more than expected.

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

Which statement best characterizes the aggregate-demand curve?

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

Which relationship does the model of aggregate demand and aggregate supply explain?

Which expenditure item is responsible for the decrease in real GDP during a recession?

What does real GDP measure?

Suppose the economy is in long-run equilibrium. If there is a tax cut at the same time that major new sources of oil are discovered in the country, what would we expect will happen in the short run?

What happened during World War II?

When would the long-run aggregate-supply curve shift right?

What happens when the dollar depreciates?

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

In addition to the price level, what does the aggregate demand and aggregate supply model focus on?

What does a fall in the economy's overall level of prices tend to do?

What does a rise in the economy's overall level of prices tend to do?

Which statement characterizes business cycles?

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.

Economists mostly agree that the Great Depression was the result of a very large adverse supply shock.

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

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