Exam 9: Introduction to Economic Fluctuations

Looking at the aggregate demand curve alone,one can tell ______ that will prevail in the economy.

When the Bank of Canada increases the money supply,at a given price level the amount of output demanded is ______ and the aggregate demand curve shifts ______.

A difference between the economic long run and the short run is that:

The relationship between the quantity of goods and services supplied and the price level is called:

Business cycles are:

The natural level of output is:

A supply shock does not occur when:

According to the quantity equation,if the velocity of money and the supply of money are fixed,and the price level increases,then the quantity of goods and services purchased:

If a change in government regulations allows banks to start paying interest on chequing accounts this will:

The vertical long-run aggregate supply curve satisfies the classical dichotomy because the natural rate of output does not depend on:

Throughout much of the 1990s,North America experienced declining energy prices.Assume that the Canadian economy was in long-run equilibrium before these declines began.a.Use the aggregate demand-aggregate supply model to illustrate graphically the short-run and long-run impact of this decline on output and prices.b.If the Bank of Canada attempted to offset this deviation from the natural rate in the short run,should the money supply be increased or decreased?

In the mid-1980s,oil prices ______,inflation was ______,and the unemployment rate ______.

Starting from long-run equilibrium,if a drought pushes up food prices throughout the economy,the Bank of Canada could move the economy more rapidly back to full employment output by:

Suppose you are an economist working for the Bank of Canada when droughts in the Prairies and floods in Ontario substantially reduce food production in Canada.Use the aggregate demand-aggregate supply model to illustrate graphically your policy recommendation to accommodate this adverse supply shock,assuming that your top priority is maintaining full employment in the economy.Be sure to label: i.the axes ii.the curves iii.the initial equilibrium values iv.the direction the curves shift v.the terminal equilibrium values.State in words what happens to prices and output as a combined result of the supply shock and the recommended Bank of Canada accommodation.

An economy is initially in long-run equilibrium.The introduction of an electronic payments system dramatically reduces the demand for money in the economy.a.What is the short-run impact on prices and output of the new system? b.What can the central bank do,if anything,to counteract the short-run changes in output and prices? c.If the central bank does not take any policy actions,what will be the long-run impact of the electronic payments system on prices and output?

Along an aggregate demand curve,derived from the quantity theory of money which of the following are held constant?

Over the business cycle,investment spending ______ consumption spending.

Assume that the economy starts from long-run equilibrium.If the Bank of Canada increases the money supply,then ______ increase(s)in the short run and ______ increase(s)in the long run.

Alan Blinder's survey of firms found that the theory of price stickiness accepted by the most firms was:

In the aggregate demand-aggregate supply model,short-run equilibrium occurs at the combination of output and prices where: