Question 1

An increase in which of the following (assuming the increase was not due to a price level change) shifts aggregate demand to the right?

Accepted Answer

A)  interest rates 
B)  immigration 
C)  government surplus 
D)  net exports 
A)  interest rates 
B)  immigration 
C)  government surplus 
D)  net exports

Question 2

Figure 14-1

-Refer to the Figure 14-1. If the economy starts at A and there is a fall in aggregate demand, what happens to the economy in the long run?

Accepted Answer

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

Question 3

In which situation does investment spending increase?

Accepted Answer

A)  when the price level rises, causing interest rates to rise 
B)  when the price level rises, causing interest rates to fall 
C)  when the price level falls, causing interest rates to rise 
D)  when the price level falls, causing interest rates to fall 
A)  when the price level rises, causing interest rates to rise 
B)  when the price level rises, causing interest rates to fall 
C)  when the price level falls, causing interest rates to rise 
D)  when the price level falls, causing interest rates to fall

Question 4

According to the sticky-wage theory, which statement is consistent with an unexpected increase in the price level?

Accepted Answer

A)  The real wage rises, and employment rises. 
B)  The real wage rises, and employment falls. 
C)  The real wage falls, and employment rises. 
D)  The real wage falls, and employment falls. 
A)  The real wage rises, and employment rises. 
B)  The real wage rises, and employment falls. 
C)  The real wage falls, and employment rises. 
D)  The real wage falls, and employment falls.

Question 5

What is the current estimate of the natural rate of unemployment in Canada?

Accepted Answer

A)  5 percent 
B)  7 percent 
C)  9 percent 
D)  11 percent 
A)  5 percent 
B)  7 percent 
C)  9 percent 
D)  11 percent

Question 6

Below are pairs of GDP growth rates and unemployment rates. Economists would be shocked to see most of these pairs. Which pair of GDP growth rates and unemployment rates is most realistic?

Accepted Answer

A)  -3 percent, 2 percent 
B)  -1 percent, 20 percent 
C)  1 percent, 7 percent 
D)  6 percent, 0 percent 
A)  -3 percent, 2 percent 
B)  -1 percent, 20 percent 
C)  1 percent, 7 percent 
D)  6 percent, 0 percent

Question 7

What happens when the dollar appreciates?

Accepted Answer

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

Question 8

How does the size of investment as a fraction of GDP compare to its importance in creating economic fluctuations?

Accepted Answer

A)  Investment is a small part of real GDP, and it accounts for a small share of the fluctuation in real GDP. 
B)  Investment is a small part of real GDP, yet it accounts for a large share of the fluctuation in real GDP. 
C)  Investment is a large part of real GDP, and it accounts for a large share of the fluctuation in real GDP. 
D)  Investment is a large part of real GDP, yet it accounts for a small share of the fluctuation in real GDP. 
A)  Investment is a small part of real GDP, and it accounts for a small share of the fluctuation in real GDP. 
B)  Investment is a small part of real GDP, yet it accounts for a large share of the fluctuation in real GDP. 
C)  Investment is a large part of real GDP, and it accounts for a large share of the fluctuation in real GDP. 
D)  Investment is a large part of real GDP, yet it accounts for a small share of the fluctuation in real GDP.

Question 9

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 10

What does the economy experience during a recession?

Accepted Answer

A)  rising employment and income 
B)  rising employment and falling income 
C)  rising income and falling employment 
D)  falling employment and income 
A)  rising employment and income 
B)  rising employment and falling income 
C)  rising income and falling employment 
D)  falling employment and income

Question 11

According to classical economic theory, which of the following do changes in the money supply affect?

Accepted Answer

A)  incentives to invest 
B)  prices 
C)  unemployment rates 
D)  aggregate supply 
A)  incentives to invest 
B)  prices 
C)  unemployment rates 
D)  aggregate supply

Question 12

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

Accepted Answer

A)  Wealth falls, people lend less, interest rates fall, and the dollar appreciates. 
B)  Wealth falls, people lend less, interest rates rise, and the dollar depreciates. 
C)  Wealth rises, people lend more, interest rates rise, and the dollar appreciates. 
D)  Wealth rises, people lend more, interest rates fall, and the dollar depreciates. 
A)  Wealth falls, people lend less, interest rates fall, and the dollar appreciates. 
B)  Wealth falls, people lend less, interest rates rise, and the dollar depreciates. 
C)  Wealth rises, people lend more, interest rates rise, and the dollar appreciates. 
D)  Wealth rises, people lend more, interest rates fall, and the dollar depreciates.

Question 13

Why is the long-run aggregate-supply curve vertical?

Accepted Answer

A)  because population grows slowly 
B)  because the government controls inflation 
C)  because money is neutral 
D)  because prices are stable 
A)  because population grows slowly 
B)  because the government controls inflation 
C)  because money is neutral 
D)  because prices are stable

Question 14

According to the sticky-price theory, which statement is consistent with an unexpected fall in the price level?

Accepted Answer

A)  Some firms' prices are lower than desired, which increases their sales. 
B)  Some firms' prices are lower than desired, which depresses their sales. 
C)  Some firms' prices are higher than desired, which increases their sales. 
D)  Some firms' prices are higher than desired, which depresses their sales. 
A)  Some firms' prices are lower than desired, which increases their sales. 
B)  Some firms' prices are lower than desired, which depresses their sales. 
C)  Some firms' prices are higher than desired, which increases their sales. 
D)  Some firms' prices are higher than desired, which depresses their sales.

Question 15

In which situation would stagflation exist?

Accepted Answer

A)  when prices and output rise 
B)  when prices rise and output falls 
C)  when prices fall and output rises 
D)  when prices and output fall 
A)  when prices and output rise 
B)  when prices rise and output falls 
C)  when prices fall and output rises 
D)  when prices and output fall

Question 16

Which of the following shifts aggregate demand to the left?

Accepted Answer

A)  the price level rises. 
B)  the price level falls. 
C)  the dollar depreciates. 
D)  the prices of stocks fall. 
A)  the price level rises. 
B)  the price level falls. 
C)  the dollar depreciates. 
D)  the prices of stocks fall.

Question 17

John Maynard Keynes advocated policies that would increase aggregate demand as a way to decrease unemployment caused by recessions.

Accepted Answer

A) True 
 B)False

Question 18

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 decrease in the money supply 
A)  a decline in output 
B)  a decrease in prices 
C)  strong bank regulations 
D)  a decrease in the money supply

Question 19

When output rises, unemployment falls.

Accepted Answer

A) True 
 B)False

Question 20

Suppose the economy is in long-run equilibrium. If there is a sharp increase in the minimum wage as well as an increase in pessimism about future business conditions, what would we expect to 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.

An increase in which of the following (assuming the increase was not due to a price level change) shifts aggregate demand to the right?

Figure 14-1 -Refer to the Figure 14-1. If the economy starts at A and there is a fall in aggregate demand, what happens to the economy in the long run?

In which situation does investment spending increase?

According to the sticky-wage theory, which statement is consistent with an unexpected increase in the price level?

What is the current estimate of the natural rate of unemployment in Canada?

Below are pairs of GDP growth rates and unemployment rates. Economists would be shocked to see most of these pairs. Which pair of GDP growth rates and unemployment rates is most realistic?

What happens when the dollar appreciates?

How does the size of investment as a fraction of GDP compare to its importance in creating economic fluctuations?

What happens to sales and profit during recessions?

What does the economy experience during a recession?

According to classical economic theory, which of the following do changes in the money supply affect?

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

Why is the long-run aggregate-supply curve vertical?

According to the sticky-price theory, which statement is consistent with an unexpected fall in the price level?

In which situation would stagflation exist?

Which of the following shifts aggregate demand to the left?

John Maynard Keynes advocated policies that would increase aggregate demand as a way to decrease unemployment caused by recessions.

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

When output rises, unemployment falls.

Suppose the economy is in long-run equilibrium. If there is a sharp increase in the minimum wage as well as an increase in pessimism about future business conditions, what would we expect to happen in the short run?

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

An increase in which of the following (assuming the increase was not due to a price level change) shifts aggregate demand to the right?

Figure 14-1 -Refer to the Figure 14-1. If the economy starts at A and there is a fall in aggregate demand, what happens to the economy in the long run?

In which situation does investment spending increase?

According to the sticky-wage theory, which statement is consistent with an unexpected increase in the price level?

What is the current estimate of the natural rate of unemployment in Canada?

Below are pairs of GDP growth rates and unemployment rates. Economists would be shocked to see most of these pairs. Which pair of GDP growth rates and unemployment rates is most realistic?

What happens when the dollar appreciates?

How does the size of investment as a fraction of GDP compare to its importance in creating economic fluctuations?

What happens to sales and profit during recessions?

What does the economy experience during a recession?

According to classical economic theory, which of the following do changes in the money supply affect?

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

Why is the long-run aggregate-supply curve vertical?

According to the sticky-price theory, which statement is consistent with an unexpected fall in the price level?

In which situation would stagflation exist?

Which of the following shifts aggregate demand to the left?

John Maynard Keynes advocated policies that would increase aggregate demand as a way to decrease unemployment caused by recessions.

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

When output rises, unemployment falls.

Suppose the economy is in long-run equilibrium. If there is a sharp increase in the minimum wage as well as an increase in pessimism about future business conditions, what would we expect to happen in the short run?

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