Question 1

The rational expectations hypothesis is a theory that states that

Accepted Answer

A) individuals can predict the future perfectly,at least with respect to macroeconomic variables like the interest rate and inflation. 
B) people make their economic plans by using all available past and present information and their understanding about how the economy operates. 
C) people make their economic plans in an irrational,intuitive manner. 
D) people make their economic plans by relying on the policy statements made by the Prime Minister and leaders in Parliament. 
A) individuals can predict the future perfectly,at least with respect to macroeconomic variables like the interest rate and inflation. 
B) people make their economic plans by using all available past and present information and their understanding about how the economy operates. 
C) people make their economic plans in an irrational,intuitive manner. 
D) people make their economic plans by relying on the policy statements made by the Prime Minister and leaders in Parliament.

Question 2

Figure 15-3  
-Figure 15-3 indicates that,in the short run,an unexpected increase in aggregate demand would cause

Accepted Answer

A) the price level to fall. 
B) the price level to rise. 
C) the unemployment rate to rise. 
D) real GDP to decrease. 
A) the price level to fall. 
B) the price level to rise. 
C) the unemployment rate to rise. 
D) real GDP to decrease.

Question 3

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 wage rate.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 4

According to the real business cycle theory,which of the following is a true statement about the effects of an oil shock in the 1970s?

Accepted Answer

A) The shock affected real variables only and did not affect nominal variables 
B) The shock shifted the short-run aggregate supply curve but not the long-run aggregate supply curve 
C) The natural rate of unemployment remained unchanged,but employment levels did decline 
D) Relative prices changed but there was no impact on the price level in general 
A) The shock affected real variables only and did not affect nominal variables 
B) The shock shifted the short-run aggregate supply curve but not the long-run aggregate supply curve 
C) The natural rate of unemployment remained unchanged,but employment levels did decline 
D) Relative prices changed but there was no impact on the price level in general

Question 5

In the short run,unanticipated inflation typically leads to

Accepted Answer

A) higher rates of unemployment. 
B) decreases in aggregate demand. 
C) lower rates of unemployment. 
D) workers' thinking the real wage has been reduced. 
A) higher rates of unemployment. 
B) decreases in aggregate demand. 
C) lower rates of unemployment. 
D) workers' thinking the real wage has been reduced.

Question 6

The trade-off between unemployment and inflation is known as

Accepted Answer

A) the Keynesian mechanism. 
B) the Phillips Curve. 
C) an expansionary gap. 
D) the new classical model. 
A) the Keynesian mechanism. 
B) the Phillips Curve. 
C) an expansionary gap. 
D) the new classical model.

Question 7

In the short run,an anticipated increase in the rate of inflation would

Accepted Answer

A) increase the unemployment rate. 
B) decrease the unemployment rate. 
C) have no effect on employment. 
D) lower the natural rate of unemployment. 
A) increase the unemployment rate. 
B) decrease the unemployment rate. 
C) have no effect on employment. 
D) lower the natural rate of unemployment.

Question 8

What are the criticisms of supply-side economics?

Accepted Answer

One criticism of supply-side economics i

Question 9

One economic theory states that people combine the effects of past policy changes on important economic variables with their own judgment about the future effects of current and future policy changes,and react accordingly.This theory is known as the

Accepted Answer

A) relevance hypothesis. 
B) contrary opinion hypothesis. 
C) rational expectations hypothesis. 
D) structural hypothesis. 
A) relevance hypothesis. 
B) contrary opinion hypothesis. 
C) rational expectations hypothesis. 
D) structural hypothesis.

Question 10

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

Accepted Answer

A) in the short run real output will remain at Q₁. 
B) in the short run real output will increase above Q₁,but in the long run it will return to Q₁. 
C) in the long run real output will increase above Q₁. 
D) real output will increase above Q₁ in both the short run and in the long run. 
A) in the short run real output will remain at Q₁. 
B) in the short run real output will increase above Q₁,but in the long run it will return to Q₁. 
C) in the long run real output will increase above Q₁. 
D) real output will increase above Q₁ in both the short run and in the long run.

Question 11

Supply-side economics is

Accepted Answer

A) policy irrelevance proposition. 
B) creating incentives to increase productivity which causes the aggregate supply curve to shift outward. 
C) expansionary policy. 
D) contractionary policy. 
A) policy irrelevance proposition. 
B) creating incentives to increase productivity which causes the aggregate supply curve to shift outward. 
C) expansionary policy. 
D) contractionary policy.

Question 12

Changes in government policy that cause the inflation rate to rise will

Accepted Answer

A) have no effect on the unemployment rate. 
B) cause the unemployment rate to fall. 
C) cause the unemployment rate to rise by the rate of inflation. 
D) cause the unemployment rate to rise,but we cannot tell by how much. 
A) have no effect on the unemployment rate. 
B) cause the unemployment rate to fall. 
C) cause the unemployment rate to rise by the rate of inflation. 
D) cause the unemployment rate to rise,but we cannot tell by how much.

Question 13

Explain the importance of expectations as it relates to the Phillips curve in terms of the trade-off between unemployment and inflation.

Accepted Answer

1.A description of the Phillips curve.
2

Question 14

The relationship between unemployment and inflation is characterized by

Accepted Answer

A) the Phillips curve 
B) the aggregate demand curve. 
C) the planned investment.curve 
D) the demand for money curve. 
A) the Phillips curve 
B) the aggregate demand curve. 
C) the planned investment.curve 
D) the demand for money curve.

Question 15

If firms anticipate that a rise in demand is likely to last for a long time,does this make them more likely or less likely to adjust their prices?

Accepted Answer

A discussion on the New Keynesian Econom

Question 16

The Phillips curve shows

Accepted Answer

A) a positive relationship in the long-run between the rate of inflation and the rate of unemployment. 
B) a negative relationship between the inflation rate and the unemployment rate,at least in the short run. 
C) a positive relationship between contractionary monetary policy and higher price levels. 
D) a positive relationship between price stability and constant,small-increment changes in the fiscal policy on the part of the Bank of Canada. 
A) a positive relationship in the long-run between the rate of inflation and the rate of unemployment. 
B) a negative relationship between the inflation rate and the unemployment rate,at least in the short run. 
C) a positive relationship between contractionary monetary policy and higher price levels. 
D) a positive relationship between price stability and constant,small-increment changes in the fiscal policy on the part of the Bank of Canada.

Question 17

The rational expectations hypothesis is associated with the

Accepted Answer

A) classical model of economics. 
B) new classical model of economics. 
C) Keynesian model of economics. 
D) neo-Keynesian model of economics. 
A) classical model of economics. 
B) new classical model of economics. 
C) Keynesian model of economics. 
D) neo-Keynesian model of economics.

Question 18

Which macroeconomic model sees fiscal policy as useful and necessary?

Accepted Answer

A) Traditional classical 
B) Traditional Keynesian 
C) New classical 
D) Monetarists 
A) Traditional classical 
B) Traditional Keynesian 
C) New classical 
D) Monetarists

Question 19

Suppose the economy is in equilibrium when there is a change in environmental policy that forces farmers to begin organic farming without any pesticides.We would expect to observe

Accepted Answer

A) a decrease in aggregate supply and an increase in aggregate demand. 
B) a decrease in both real output and the natural rate of unemployment. 
C) a decrease in real output and an increase in the natural rate of unemployment. 
D) a decrease in real output and an increase in the price level. 
A) a decrease in aggregate supply and an increase in aggregate demand. 
B) a decrease in both real output and the natural rate of unemployment. 
C) a decrease in real output and an increase in the natural rate of unemployment. 
D) a decrease in real output and an increase in the price level.

Question 20

For the policy irrelevance theorem to hold,people must

Accepted Answer

A) know the future perfectly. 
B) not persistently make the same mistakes in forecasting the future. 
C) know exactly what the Bank of Canada is planning to do. 
D) never make mistakes in their forecasts even when they do not know the future perfectly. 
A) know the future perfectly. 
B) not persistently make the same mistakes in forecasting the future. 
C) know exactly what the Bank of Canada is planning to do. 
D) never make mistakes in their forecasts even when they do not know the future perfectly.

The rational expectations hypothesis is a theory that states that

Figure 15-3 -Figure 15-3 indicates that,in the short run,an unexpected increase in aggregate demand would 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 wage rate.Which point represents the new short run equilibrium?

According to the real business cycle theory,which of the following is a true statement about the effects of an oil shock in the 1970s?

In the short run,unanticipated inflation typically leads to

The trade-off between unemployment and inflation is known as

In the short run,an anticipated increase in the rate of inflation would

What are the criticisms of supply-side economics?

One economic theory states that people combine the effects of past policy changes on important economic variables with their own judgment about the future effects of current and future policy changes,and react accordingly.This theory is known as the

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

Supply-side economics is

Changes in government policy that cause the inflation rate to rise will

Explain the importance of expectations as it relates to the Phillips curve in terms of the trade-off between unemployment and inflation.

The relationship between unemployment and inflation is characterized by

If firms anticipate that a rise in demand is likely to last for a long time,does this make them more likely or less likely to adjust their prices?

The Phillips curve shows

The rational expectations hypothesis is associated with the

Which macroeconomic model sees fiscal policy as useful and necessary?

Suppose the economy is in equilibrium when there is a change in environmental policy that forces farmers to begin organic farming without any pesticides.We would expect to observe

For the policy irrelevance theorem to hold,people must

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

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Exam 15: Issues in Stabilization Policy

The rational expectations hypothesis is a theory that states that

Figure 15-3 -Figure 15-3 indicates that,in the short run,an unexpected increase in aggregate demand would 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 wage rate.Which point represents the new short run equilibrium?

According to the real business cycle theory,which of the following is a true statement about the effects of an oil shock in the 1970s?

In the short run,unanticipated inflation typically leads to

The trade-off between unemployment and inflation is known as

In the short run,an anticipated increase in the rate of inflation would

What are the criticisms of supply-side economics?

One economic theory states that people combine the effects of past policy changes on important economic variables with their own judgment about the future effects of current and future policy changes,and react accordingly.This theory is known as the

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

Supply-side economics is

Changes in government policy that cause the inflation rate to rise will

Explain the importance of expectations as it relates to the Phillips curve in terms of the trade-off between unemployment and inflation.

The relationship between unemployment and inflation is characterized by

If firms anticipate that a rise in demand is likely to last for a long time,does this make them more likely or less likely to adjust their prices?

The Phillips curve shows

The rational expectations hypothesis is associated with the

Which macroeconomic model sees fiscal policy as useful and necessary?

Suppose the economy is in equilibrium when there is a change in environmental policy that forces farmers to begin organic farming without any pesticides.We would expect to observe

For the policy irrelevance theorem to hold,people must

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