Question 1

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

Accepted Answer

A)  if the capital stock increases 
B)  if there is a hurricane 
C)  if the government removes some environmental regulations that limit production methods 
D)  if trade barriers are removed 
A)  if the capital stock increases 
B)  if there is a hurricane 
C)  if the government removes some environmental regulations that limit production methods 
D)  if trade barriers are removed

Question 2

What did Keynes believe caused recessions and depressions?

Accepted Answer

A)  excess aggregate demand 
B)  inadequate aggregate demand 
C)  excess aggregate supply 
D)  inadequate aggregate supply 
A)  excess aggregate demand 
B)  inadequate aggregate demand 
C)  excess aggregate supply 
D)  inadequate aggregate supply

Question 3

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 4

Which statement best describes the effects of a fall in the price level?

Accepted Answer

A)  The real exchange rate and interest rates rise. 
B)  The real exchange rate and interest rates fall. 
C)  The real exchange rate falls,and interest rates rise. 
D)  The real exchange rate rises,and interest rates fall. 
A)  The real exchange rate and interest rates rise. 
B)  The real exchange rate and interest rates fall. 
C)  The real exchange rate falls,and interest rates rise. 
D)  The real exchange rate rises,and interest rates fall.

Question 5

When did the recession that saw the largest spike in the unemployment rate in Canada begin?

Accepted Answer

A)  1979 
B)  1982 
C)  1991 
D)  2008 
A)  1979 
B)  1982 
C)  1991 
D)  2008

Question 6

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?

Accepted Answer

A)  In the short run,real GDP will rise,and the price level might rise,fall,or stay the same.In the long run,the price level might rise,fall,or stay the same,but real GDP will be unaffected. 
B)  In the short run,real GDP will fall,and the price level might rise,fall,or stay the same.In the long run,the price level might rise,fall,or stay the same,but real GDP will be unaffected. 
C)  In the short run,real GDP will rise,and the price level might rise,fall,or stay the same.In the long run,the price level might rise,fall,or stay the same,but real GDP will be lower. 
D)  In the short run,real GDP will fall,and the price level might rise,fall,or stay the same.In the long run,the price level might rise,fall,or stay the same,but real GDP will be lower. 
A)  In the short run,real GDP will rise,and the price level might rise,fall,or stay the same.In the long run,the price level might rise,fall,or stay the same,but real GDP will be unaffected. 
B)  In the short run,real GDP will fall,and the price level might rise,fall,or stay the same.In the long run,the price level might rise,fall,or stay the same,but real GDP will be unaffected. 
C)  In the short run,real GDP will rise,and the price level might rise,fall,or stay the same.In the long run,the price level might rise,fall,or stay the same,but real GDP will be lower. 
D)  In the short run,real GDP will fall,and the price level might rise,fall,or stay the same.In the long run,the price level might rise,fall,or stay the same,but real GDP will be lower.

Question 7

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 8

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 9

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 10

Which of the following shifts the short-run,but not the long-run,aggregate supply right?

Accepted Answer

A)  a decrease in the price level 
B)  a decrease in the expected price level 
C)  a decrease in the natural rate of unemployment 
D)  a decrease in the savings rate 
A)  a decrease in the price level 
B)  a decrease in the expected price level 
C)  a decrease in the natural rate of unemployment 
D)  a decrease in the savings rate

Question 11

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 12

Suppose the economy is in long-run equilibrium.In a short span of time,there is a decline in the money supply,a tax increase,a pessimistic revision of expectations about future business conditions,and a rise in the value of the dollar.In the short run,what would we expect to happen?

Accepted Answer

A)  The price level and real GDP will both rise. 
B)  The price level and real GDP will both fall. 
C)  The price level and real GDP will both stay the same. 
D)  The price level will increase,and the real GDP will fall. 
A)  The price level and real GDP will both rise. 
B)  The price level and real GDP will both fall. 
C)  The price level and real GDP will both stay the same. 
D)  The price level will increase,and the real GDP will fall.

Question 13

What is one explanation for the instability of oil prices?

Accepted Answer

A)  inefficient production techniques that have made it unprofitable to develop oil 
B)  fluctuations in the inflation rate in major economies 
C)  pressure from environmental groups to reduce carbon emissions
D expansion in the market for Canadian oil due to new pipeline construction 
A)  inefficient production techniques that have made it unprofitable to develop oil 
B)  fluctuations in the inflation rate in major economies 
C)  pressure from environmental groups to reduce carbon emissions
D expansion in the market for Canadian oil due to new pipeline construction

Question 14

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 15

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 16

In 1982,Canada was in a recession.What would you expect NOT to have happened?

Accepted Answer

A)  layoffs and firings 
B)  a higher rate of foreclosures 
C)  increased claims for unemployment insurance 
D)  increased investment spending 
A)  layoffs and firings 
B)  a higher rate of foreclosures 
C)  increased claims for unemployment insurance 
D)  increased investment spending

Question 17

Most economists use the aggregate demand and aggregate supply model primarily to analyze which of the following?

Accepted Answer

A)  short-run fluctuations in the economy 
B)  the effects of macroeconomic policy on the prices of individual goods 
C)  the long-run effects of international trade policies 
D)  productivity and economic growth 
A)  short-run fluctuations in the economy 
B)  the effects of macroeconomic policy on the prices of individual goods 
C)  the long-run effects of international trade policies 
D)  productivity and economic growth

Question 18

Suppose that a decrease in the demand for goods and services pushes the economy into recession.What happens to the price level? If the government does nothing,what ensures that the economy still eventually gets back to the natural rate of output?

Accepted Answer

A decrease in aggregate demand causes th

Question 19

An economy is described by the aggregate-demand curve Y=70-P and the short-run the aggregate-supply curve Y=10+2P.
a)If the economy is in long-run equilibrium,what are the long-run level of output,the actual,and the expected price level?
b)Suppose consumers' confidence in the economy declines so that the aggregate demand declines by 10 percent.Calculate the new short-run equilibrium.What is the rate of change in output induced by the decline in confidence? What is the inflation rate?
c)After a while,when some people observe the reduced economic activity and unemployment rises,they accept lower wages.Calculate the long-run output and price level.

Accepted Answer

a)If the economy is in equilibrium,the s

Question 20

In the 1970s people had become accustomed to high inflation.In 1979,the Bank of Canada decided to fight inflation and decreased the money supply growth rates.Many people thought that the Bank of Canada's action would cause a recession.Is this thinking consistent with the aggregate demand and aggregate supply model? Explain.According to monetary misperceptions theory,what should have happened to output if the inflation rate fell relative to what people expected? Explain.

Accepted Answer

The decrease in the money supply would s

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

What did Keynes believe caused recessions and depressions?

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

Which statement best describes the effects of a fall in the price level?

When did the recession that saw the largest spike in the unemployment rate in Canada begin?

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?

What typically rises during a recession?

What happened during World War II?

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

Which of the following shifts the short-run,but not the long-run,aggregate supply right?

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

Suppose the economy is in long-run equilibrium.In a short span of time,there is a decline in the money supply,a tax increase,a pessimistic revision of expectations about future business conditions,and a rise in the value of the dollar.In the short run,what would we expect to happen?

What is one explanation for the instability of oil prices?

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

Which of the following shifts aggregate demand to the left?

In 1982,Canada was in a recession.What would you expect NOT to have happened?

Most economists use the aggregate demand and aggregate supply model primarily to analyze which of the following?

Suppose that a decrease in the demand for goods and services pushes the economy into recession.What happens to the price level? If the government does nothing,what ensures that the economy still eventually gets back to the natural rate of output?

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

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

What did Keynes believe caused recessions and depressions?

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

Which statement best describes the effects of a fall in the price level?

When did the recession that saw the largest spike in the unemployment rate in Canada begin?

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?

What typically rises during a recession?

What happened during World War II?

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

Which of the following shifts the short-run,but not the long-run,aggregate supply right?

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

Suppose the economy is in long-run equilibrium.In a short span of time,there is a decline in the money supply,a tax increase,a pessimistic revision of expectations about future business conditions,and a rise in the value of the dollar.In the short run,what would we expect to happen?

What is one explanation for the instability of oil prices?

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

Which of the following shifts aggregate demand to the left?

In 1982,Canada was in a recession.What would you expect NOT to have happened?

Most economists use the aggregate demand and aggregate supply model primarily to analyze which of the following?

Suppose that a decrease in the demand for goods and services pushes the economy into recession.What happens to the price level? If the government does nothing,what ensures that the economy still eventually gets back to the natural rate of output?

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