Question 1

Changes in the price level affect which component of aggregate demand?

Accepted Answer

A)  only consumption and investment 
B)  only consumption and net exports 
C)  only consumption 
D)  consumption,investment,and net exports 
A)  only consumption and investment 
B)  only consumption and net exports 
C)  only consumption 
D)  consumption,investment,and net exports

Question 2

In the mid-1970s the price of oil rose dramatically.What did this event cause?

Accepted Answer

A)  It shifted aggregate supply left. 
B)  It caused Canadian prices to fall. 
C)  The aggregate demand increased because of an increase in the demand for gasoline. 
D)  OPEC to increase oil production 
A)  It shifted aggregate supply left. 
B)  It caused Canadian prices to fall. 
C)  The aggregate demand increased because of an increase in the demand for gasoline. 
D)  OPEC to increase oil production

Question 3

Review the sticky-wage theory of the short-run aggregate-supply curve.
a)Use the sticky-wage theory to explain why the short-run aggregate-supply curve is upward sloping.
b)Based on the same theory,construct an argument to explain why the aggregate-demand curve is downward sloping.Though simple and appealing,why may this theory not completely explain the short-run aggregate-demand curve?

Accepted Answer

a)When the price level increases beyond

Question 4

When taxes increase,consumption decreases.How is this situation represented in the aggregate demand and aggregate supply model?

Accepted Answer

A)  by a movement to the left along a given aggregate-demand curve 
B)  by shifting aggregate demand to the left 
C)  by shifting aggregate supply to the left 
D)  by a movement to the right along a given aggregate-demand curve 
A)  by a movement to the left along a given aggregate-demand curve 
B)  by shifting aggregate demand to the left 
C)  by shifting aggregate supply to the left 
D)  by a movement to the right along a given aggregate-demand curve

Question 5

Figure 14-1    
-Refer to the Figure 14-1.Which path indicates how the economy would move to long run equilibrium?

Accepted Answer

A)  from A to B 
B)  from C to B 
C)  from D to C 
D)  From C to A 
A)  from A to B 
B)  from C to B 
C)  from D to C 
D)  From C to A

Question 6

What would cause prices and real GDP to rise in the short run?

Accepted Answer

A)  short-run aggregate supply shifts right 
B)  short-run aggregate supply shifts left 
C)  aggregate demand shifts right 
D)  aggregate demand shifts left 
A)  short-run aggregate supply shifts right 
B)  short-run aggregate supply shifts left 
C)  aggregate demand shifts right 
D)  aggregate demand shifts left

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

A decrease in the price level makes consumers feel wealthier,so they purchase more.This logic helps explain why the aggregate demand curve slopes downward.

Accepted Answer

A) True 
 B)False

Question 9

Suppose the economy is in long-run equilibrium.If there is a sharp decline in the stock market combined with a significant increase in immigration of skilled workers,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,real GDP will rise,and the price level might rise,fall,or stay the same. 
B)  In the short run,the price level will fall,and real GDP might rise,fall,or stay the same.In the long-run,real GDP and the price level will be unaffected. 
C)  In the short run,the price level will rise,and real GDP might rise,fall,or stay the same.In the long run,real GDP will rise,and the price level will fall. 
D)  In the short run,the price level will fall,and real GDP might rise,fall,or stay the same.In the long run,real GDP will rise,and the price level will fall. 
A)  In the short run,real GDP will rise,and the price level might rise,fall,or stay the same.In the long-run,real GDP will rise,and the price level might rise,fall,or stay the same. 
B)  In the short run,the price level will fall,and real GDP might rise,fall,or stay the same.In the long-run,real GDP and the price level will be unaffected. 
C)  In the short run,the price level will rise,and real GDP might rise,fall,or stay the same.In the long run,real GDP will rise,and the price level will fall. 
D)  In the short run,the price level will fall,and real GDP might rise,fall,or stay the same.In the long run,real GDP will rise,and the price level will fall.

Question 10

Figure 14-1    
-Refer to the Figure 14-1.How would an adverse shift in aggregate supply move the economy?

Accepted Answer

A)  from A to B 
B)  from C to D 
C)  from B to A 
D)  from D to C 
A)  from A to B 
B)  from C to D 
C)  from B to A 
D)  from D to C

Question 11

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 12

Which statement is consistent with the theory of aggregate supply?

Accepted Answer

A)  An increase in the expected price level shifts the short-run aggregate-supply curve to the right,and an increase in the actual price level shifts the short-run aggregate supply to the right. 
B)  An increase in the expected price level shifts the short-run aggregate-supply curve to the right,and an increase in the actual price level does not shift the short-run aggregate supply. 
C)  An increase in the expected price level shifts the short-run aggregate-supply curve to the left,and an increase in the actual price level shifts the short-run aggregate supply to the left. 
D)  An increase in the expected price level shifts the short-run aggregate-supply curve to the left,and an increase in the actual price level does not shift the short-run aggregate supply. 
A)  An increase in the expected price level shifts the short-run aggregate-supply curve to the right,and an increase in the actual price level shifts the short-run aggregate supply to the right. 
B)  An increase in the expected price level shifts the short-run aggregate-supply curve to the right,and an increase in the actual price level does not shift the short-run aggregate supply. 
C)  An increase in the expected price level shifts the short-run aggregate-supply curve to the left,and an increase in the actual price level shifts the short-run aggregate supply to the left. 
D)  An increase in the expected price level shifts the short-run aggregate-supply curve to the left,and an increase in the actual price level does not shift the short-run aggregate supply.

Question 13

What is classical dichotomy?

Accepted Answer

A)  It is the separation of variables that move with the business cycle and variables that do not. 
B)  It is the separation of changes in money and changes in government expenditures. 
C)  It is the separation of endogenous and exogenous variables. 
D)  It is the separation of real and nominal variables. 
A)  It is the separation of variables that move with the business cycle and variables that do not. 
B)  It is the separation of changes in money and changes in government expenditures. 
C)  It is the separation of endogenous and exogenous variables. 
D)  It is the separation of real and nominal variables.

Question 14

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

Accepted Answer

A)  The interest rate increases,the dollar depreciates,and net exports increase. 
B)  The interest rate increases,the dollar appreciates,and net exports decrease. 
C)  The interest rate decreases,the dollar depreciates,and net exports increase. 
D)  The interest rate decreases,the dollar appreciates,and net exports decrease. 
A)  The interest rate increases,the dollar depreciates,and net exports increase. 
B)  The interest rate increases,the dollar appreciates,and net exports decrease. 
C)  The interest rate decreases,the dollar depreciates,and net exports increase. 
D)  The interest rate decreases,the dollar appreciates,and net exports decrease.

Question 15

How does the aggregate demand and supply model reflect a decrease in taxes?

Accepted Answer

A)  Consumption increases,so aggregate demand shifts right. 
B)  Consumption increases,so aggregate supply shifts right. 
C)  Consumption decreases,so aggregate demand shifts left. 
D)  Consumption decreases,so aggregate supply shifts left. 
A)  Consumption increases,so aggregate demand shifts right. 
B)  Consumption increases,so aggregate supply shifts right. 
C)  Consumption decreases,so aggregate demand shifts left. 
D)  Consumption decreases,so aggregate supply shifts left.

Question 16

All else equal,what happens as the price level falls?

Accepted Answer

A)  The money supply falls. 
B)  Interest rates rise. 
C)  Dollars become more valuable. 
D)  Dollars become less valuable. 
A)  The money supply falls. 
B)  Interest rates rise. 
C)  Dollars become more valuable. 
D)  Dollars become less valuable.

Question 17

What is an important determinant of the price at which Canadian producers can sell their oil?

Accepted Answer

A)  their ability to ship oil to the U.S.and to overseas markets 
B)  their ability to ship oil to the U.S.market only 
C)  their ability to ship oil to overseas markets only 
D)  their ability to ship oil domestically 
A)  their ability to ship oil to the U.S.and to overseas markets 
B)  their ability to ship oil to the U.S.market only 
C)  their ability to ship oil to overseas markets only 
D)  their ability to ship oil domestically

Question 18

How much has Canada changed its oil consumption since the first OPEC price shock in 1973?

Accepted Answer

A)  increased by 20% 
B)  decreased by 30% 
C)  increased by 40% 
D)  decreased by more than 50% 
A)  increased by 20% 
B)  decreased by 30% 
C)  increased by 40% 
D)  decreased by more than 50%

Question 19

Suppose a shift in aggregate demand creates an economic contraction.If policymakers can respond with sufficient speed and precision,how can they offset the initial shift?

Accepted Answer

A)  by shifting the aggregate supply right 
B)  by shifting the aggregate supply left 
C)  by shifting the aggregate demand right 
D)  by shifting the aggregate demand left 
A)  by shifting the aggregate supply right 
B)  by shifting the aggregate supply left 
C)  by shifting the aggregate demand right 
D)  by shifting the aggregate demand left

Question 20

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

Accepted Answer

A)  The real value of money and the real exchange rate rise. 
B)  The real value of money and the real exchange rate fall. 
C)  The real value of money rises,and the real exchange rate falls. 
D)  The real value of money falls,and the real exchange rate rises. 
A)  The real value of money and the real exchange rate rise. 
B)  The real value of money and the real exchange rate fall. 
C)  The real value of money rises,and the real exchange rate falls. 
D)  The real value of money falls,and the real exchange rate rises.

Changes in the price level affect which component of aggregate demand?

In the mid-1970s the price of oil rose dramatically.What did this event cause?

When taxes increase,consumption decreases.How is this situation represented in the aggregate demand and aggregate supply model?

Figure 14-1 -Refer to the Figure 14-1.Which path indicates how the economy would move to long run equilibrium?

What would cause prices and real GDP to rise in the short run?

What happens when the dollar appreciates?

A decrease in the price level makes consumers feel wealthier,so they purchase more.This logic helps explain why the aggregate demand curve slopes downward.

Suppose the economy is in long-run equilibrium.If there is a sharp decline in the stock market combined with a significant increase in immigration of skilled workers,what would we expect to happen?

Figure 14-1 -Refer to the Figure 14-1.How would an adverse shift in aggregate supply move the economy?

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

Which statement is consistent with the theory of aggregate supply?

What is classical dichotomy?

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

How does the aggregate demand and supply model reflect a decrease in taxes?

All else equal,what happens as the price level falls?

What is an important determinant of the price at which Canadian producers can sell their oil?

How much has Canada changed its oil consumption since the first OPEC price shock in 1973?

Suppose a shift in aggregate demand creates an economic contraction.If policymakers can respond with sufficient speed and precision,how can they offset the initial shift?

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

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

Changes in the price level affect which component of aggregate demand?

In the mid-1970s the price of oil rose dramatically.What did this event cause?

When taxes increase,consumption decreases.How is this situation represented in the aggregate demand and aggregate supply model?

Figure 14-1 -Refer to the Figure 14-1.Which path indicates how the economy would move to long run equilibrium?

What would cause prices and real GDP to rise in the short run?

What happens when the dollar appreciates?

A decrease in the price level makes consumers feel wealthier,so they purchase more.This logic helps explain why the aggregate demand curve slopes downward.

Suppose the economy is in long-run equilibrium.If there is a sharp decline in the stock market combined with a significant increase in immigration of skilled workers,what would we expect to happen?

Figure 14-1 -Refer to the Figure 14-1.How would an adverse shift in aggregate supply move the economy?

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

Which statement is consistent with the theory of aggregate supply?

What is classical dichotomy?

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

How does the aggregate demand and supply model reflect a decrease in taxes?

All else equal,what happens as the price level falls?

What is an important determinant of the price at which Canadian producers can sell their oil?

How much has Canada changed its oil consumption since the first OPEC price shock in 1973?

Suppose a shift in aggregate demand creates an economic contraction.If policymakers can respond with sufficient speed and precision,how can they offset the initial shift?

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

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