Question 1

Real business cycle theory explains changes in employment and output by focusing on

Accepted Answer

A) real supply side factors. 
B) changes in monetary policy. 
C) changes in fiscal policy. 
D) the interaction of fiscal and monetary policies. 
A) real supply side factors. 
B) changes in monetary policy. 
C) changes in fiscal policy. 
D) the interaction of fiscal and monetary policies.

Question 2

New Keynesian economists believe that

Accepted Answer

A) both wages and prices are "sticky." 
B) wages are flexible in the short run but prices are not. 
C) prices are fully flexible in the short run. 
D) wages are fully flexible in the short run. 
A) both wages and prices are "sticky." 
B) wages are flexible in the short run but prices are not. 
C) prices are fully flexible in the short run. 
D) wages are fully flexible in the short run.

Question 3

The nonaccelerating inflation rate of unemployment (NAIRU)is

Accepted Answer

A) discretionary policy making. 
B) nondiscretionary policy making. 
C) natural rate of unemployment. 
D) the rate of unemployment below which the rate of inflation tends to rise and above which the rate of inflation tends to fall. 
A) discretionary policy making. 
B) nondiscretionary policy making. 
C) natural rate of unemployment. 
D) the rate of unemployment below which the rate of inflation tends to rise and above which the rate of inflation tends to fall.

Question 4

What is the modern view of the Phillips curve?

Accepted Answer

The modern view is that there is no trad

Question 5

The natural rate of unemployment is

Accepted Answer

A) zero. 
B) the unemployment rate when there is no structural unemployment. 
C) the unemployment rate when there is no structural or cyclical unemployment. 
D) the unemployment rate that exists in long-run equilibrium,after adjustments to all changes have occurred. 
A) zero. 
B) the unemployment rate when there is no structural unemployment. 
C) the unemployment rate when there is no structural or cyclical unemployment. 
D) the unemployment rate that exists in long-run equilibrium,after adjustments to all changes have occurred.

Question 6

When the Phillips curve was first used in economics,many economists believed that

Accepted Answer

A) the government could fine-tune the economy and generate both the natural rate of unemployment and zero inflation. 
B) the government could fine-tune the economy and pick the most preferred combination of unemployment and inflation. 
C) low unemployment could be obtained only by generating rapidly increasing inflation. 
D) there was no relationship between inflation and unemployment,at least in the long run. 
A) the government could fine-tune the economy and generate both the natural rate of unemployment and zero inflation. 
B) the government could fine-tune the economy and pick the most preferred combination of unemployment and inflation. 
C) low unemployment could be obtained only by generating rapidly increasing inflation. 
D) there was no relationship between inflation and unemployment,at least in the long run.

Question 7

Figure 15-2  
-In Figure 15-2,suppose the economy is initially at a short run equilibrium at point A and there is an unanticipated increase in the money supply.Which point represents the new short run equilibrium?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
A) A 
B) B 
C) C 
D) D

Question 8

According to the efficiency wage theory,

Accepted Answer

A) there will be no unemployment in the economy. 
B) a higher real wage will increase worker productivity. 
C) economic agents tend to underestimate the rate of inflation. 
D) employers hold wages below their equilibrium level. 
A) there will be no unemployment in the economy. 
B) a higher real wage will increase worker productivity. 
C) economic agents tend to underestimate the rate of inflation. 
D) employers hold wages below their equilibrium level.

Question 9

Cyclical unemployment is

Accepted Answer

A) the difference between the unemployment rate when the economy is in a recession and the unemployment rate when the economy is at the peak of an expansion. 
B) the difference between the actual unemployment rate and the natural rate of unemployment. 
C) the unemployment due to union activities and government-imposed restrictions to entry into specific occupations. 
D) the unemployment due to the unemployment benefits and welfare programs of the government. 
A) the difference between the unemployment rate when the economy is in a recession and the unemployment rate when the economy is at the peak of an expansion. 
B) the difference between the actual unemployment rate and the natural rate of unemployment. 
C) the unemployment due to union activities and government-imposed restrictions to entry into specific occupations. 
D) the unemployment due to the unemployment benefits and welfare programs of the government.

Question 10

Which macroeconomic model states that changes in the money supply affect aggregate demand directly,but stabilization policies utilizing discretionary monetary policy is too difficult to do?

Accepted Answer

A) Traditional Keynesian 
B) New classical 
C) New Keynesian 
D) Modern monetarism 
A) Traditional Keynesian 
B) New classical 
C) New Keynesian 
D) Modern monetarism

Question 11

Suppose there is an oil supply shock to the Canadian economy due to an embargo.According to the real business cycle theory,the supply shock

Accepted Answer

A) would increase the rate of unemployment in the long run. 
B) would decrease the rate of unemployment in the long run. 
C) not have any long term effect on the labour market. 
D) would cause economywide deflation. 
A) would increase the rate of unemployment in the long run. 
B) would decrease the rate of unemployment in the long run. 
C) not have any long term effect on the labour market. 
D) would cause economywide deflation.

Question 12

What is the main tenet(s)of the Real Business Cycle Theory?

Accepted Answer

That only real supply side factors are t

Question 13

A reduction in world oil supplies is likely to cause

Accepted Answer

A) an increase in aggregate demand and a decrease in the equilibrium price level. 
B) a decrease in equilibrium price level and an increase in real GDP. 
C) an increase in equilibrium price level and an increase in real GDP. 
D) a reduction in aggregate supply,a rise in the equilibrium price level,and a fall in real GDP. 
A) an increase in aggregate demand and a decrease in the equilibrium price level. 
B) a decrease in equilibrium price level and an increase in real GDP. 
C) an increase in equilibrium price level and an increase in real GDP. 
D) a reduction in aggregate supply,a rise in the equilibrium price level,and a fall in real GDP.

Question 14

Figure 15-2  
-In Figure 15-2,suppose the economy is initially at a short run equilibrium at point C and there is an unanticipated decrease in the money supply.Which point represents the new short run equilibrium?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
A) A 
B) B 
C) C 
D) D

Question 15

According to the new classical economists and the policy irrelevance proposition,real GDP is determined by

Accepted Answer

A) the economy's aggregate demand curve. 
B) the economy's long-run aggregate supply curve. 
C) the rate of inflation only. 
D) a combination of fiscal policy and monetary policy. 
A) the economy's aggregate demand curve. 
B) the economy's long-run aggregate supply curve. 
C) the rate of inflation only. 
D) a combination of fiscal policy and monetary policy.

Question 16

The stagflation experienced by many of the world's industrialized economies during the late 1960s and the 1970s showed us that

Accepted Answer

A) the Phillips curve accurately represents the trade-off between unemployment and inflation. 
B) both inflation and economic expansion could exist simultaneously. 
C) the relationship between unemployment and inflation was not as clear-cut as presented on the Phillips curve. 
D) it is possible to alleviate economic stagflation through the government discretionary fiscal policy. 
A) the Phillips curve accurately represents the trade-off between unemployment and inflation. 
B) both inflation and economic expansion could exist simultaneously. 
C) the relationship between unemployment and inflation was not as clear-cut as presented on the Phillips curve. 
D) it is possible to alleviate economic stagflation through the government discretionary fiscal policy.

Question 17

Figure 15-4  
-In Figure 15-4,if A is the initial equilibrium point and there is an unanticipated rise in aggregate demand from A D₁ to A D₂,then

Accepted Answer

A) the new short run equilibrium will be at point B. 
B) the new long run equilibrium will be at point B. 
C) the new short run equilibrium will be at point D. 
D) real GDP per year will fall below Q₁. 
A) the new short run equilibrium will be at point B. 
B) the new long run equilibrium will be at point B. 
C) the new short run equilibrium will be at point D. 
D) real GDP per year will fall below Q₁.

Question 18

Assume that the government decides to use fiscal or monetary policy to stimulate the economy,and that this action comes as a surprise to most individuals and businesses.In the short run,the result will be

Accepted Answer

A) a decrease in the average duration of unemployment and a decrease in the unemployment rate. 
B) an increase in the average duration of unemployment and an increase in the unemployment rate. 
C) a decrease in aggregated demand and a rise in the price level. 
D) an increase in aggregate demand and a fall in the price level. 
A) a decrease in the average duration of unemployment and a decrease in the unemployment rate. 
B) an increase in the average duration of unemployment and an increase in the unemployment rate. 
C) a decrease in aggregated demand and a rise in the price level. 
D) an increase in aggregate demand and a fall in the price level.

Question 19

Figure 15-1  
-In Figure 15-1,line ABC is a

Accepted Answer

A) job offer curve. 
B) reservation wage curve. 
C) Phillips curve. 
D) Keynesian transmission curve. 
A) job offer curve. 
B) reservation wage curve. 
C) Phillips curve. 
D) Keynesian transmission curve.

Question 20

The new Keynesian economics differs from the new classical theory with respect to their assumptions concerning

Accepted Answer

A) the shape of the aggregate demand curve. 
B) price flexibility. 
C) the importance of interest rates in determining investment spending. 
D) the shape of the short-run aggregate demand curve. 
A) the shape of the aggregate demand curve. 
B) price flexibility. 
C) the importance of interest rates in determining investment spending. 
D) the shape of the short-run aggregate demand curve.

Real business cycle theory explains changes in employment and output by focusing on

New Keynesian economists believe that

The nonaccelerating inflation rate of unemployment (NAIRU)is

What is the modern view of the Phillips curve?

The natural rate of unemployment is

When the Phillips curve was first used in economics,many economists believed that

Figure 15-2 -In Figure 15-2,suppose the economy is initially at a short run equilibrium at point A and there is an unanticipated increase in the money supply.Which point represents the new short run equilibrium?

According to the efficiency wage theory,

Cyclical unemployment is

Which macroeconomic model states that changes in the money supply affect aggregate demand directly,but stabilization policies utilizing discretionary monetary policy is too difficult to do?

Suppose there is an oil supply shock to the Canadian economy due to an embargo.According to the real business cycle theory,the supply shock

What is the main tenet(s)of the Real Business Cycle Theory?

A reduction in world oil supplies is likely to cause

Figure 15-2 -In Figure 15-2,suppose the economy is initially at a short run equilibrium at point C and there is an unanticipated decrease in the money supply.Which point represents the new short run equilibrium?

According to the new classical economists and the policy irrelevance proposition,real GDP is determined by

The stagflation experienced by many of the world's industrialized economies during the late 1960s and the 1970s showed us that

Figure 15-4 -In Figure 15-4,if A is the initial equilibrium point and there is an unanticipated rise in aggregate demand from A D₁ to A D₂,then

Assume that the government decides to use fiscal or monetary policy to stimulate the economy,and that this action comes as a surprise to most individuals and businesses.In the short run,the result will be

Figure 15-1 -In Figure 15-1,line ABC is a

The new Keynesian economics differs from the new classical theory with respect to their assumptions concerning

The Nature of Economics

Production Possibilities and Economic Systems

Demand and Supply

Introduction to Macroeconomics

Measuring the Economys Performance

Modelling Real Gdp and the Price Level in the Long Run

Economic Growth and Development

Modelling Real Gdp and the Price Level in the Short Run

Consumption, investment, and the Multiplier

The Public Sector

Fiscal Policy and the Public Debt

Money and the Banking System

Money Creation and Deposit Insurance

The Bank of Canada and Monetary Policy

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters

Exam 15: Issues in Stabilization Policy

Real business cycle theory explains changes in employment and output by focusing on

New Keynesian economists believe that

The nonaccelerating inflation rate of unemployment (NAIRU)is

What is the modern view of the Phillips curve?

The natural rate of unemployment is

When the Phillips curve was first used in economics,many economists believed that

Figure 15-2 -In Figure 15-2,suppose the economy is initially at a short run equilibrium at point A and there is an unanticipated increase in the money supply.Which point represents the new short run equilibrium?

According to the efficiency wage theory,

Cyclical unemployment is

Which macroeconomic model states that changes in the money supply affect aggregate demand directly,but stabilization policies utilizing discretionary monetary policy is too difficult to do?

Suppose there is an oil supply shock to the Canadian economy due to an embargo.According to the real business cycle theory,the supply shock

What is the main tenet(s)of the Real Business Cycle Theory?

A reduction in world oil supplies is likely to cause

Figure 15-2 -In Figure 15-2,suppose the economy is initially at a short run equilibrium at point C and there is an unanticipated decrease in the money supply.Which point represents the new short run equilibrium?

According to the new classical economists and the policy irrelevance proposition,real GDP is determined by

The stagflation experienced by many of the world's industrialized economies during the late 1960s and the 1970s showed us that

Figure 15-4 -In Figure 15-4,if A is the initial equilibrium point and there is an unanticipated rise in aggregate demand from A D₁ to A D₂,then

Assume that the government decides to use fiscal or monetary policy to stimulate the economy,and that this action comes as a surprise to most individuals and businesses.In the short run,the result will be

Figure 15-1 -In Figure 15-1,line ABC is a

The new Keynesian economics differs from the new classical theory with respect to their assumptions concerning

The Nature of Economics

Production Possibilities and Economic Systems

Demand and Supply

Introduction to Macroeconomics

Measuring the Economys Performance

Modelling Real Gdp and the Price Level in the Long Run

Economic Growth and Development

Modelling Real Gdp and the Price Level in the Short Run

Consumption, investment, and the Multiplier

The Public Sector

Fiscal Policy and the Public Debt

Money and the Banking System

Money Creation and Deposit Insurance

The Bank of Canada and Monetary Policy

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters