Question 1

Explain how the aggregate demand and aggregate supply model can be made more dynamic.

Accepted Answer

The answer of Explain how the aggregate demand and aggregate...

Question 2

Inflation will

Accepted Answer

A) increase aggregate demand. 
B) increase the quantity of real GDP demanded. 
C) decrease aggregate demand. 
D) decrease the quantity of real GDP demanded. 
E) increase aggregate supply.

Question 3

Which of the following is considered a negative supply shock?

Accepted Answer

A) increasing immigration in the economy causes the labour supply to rise 
B) an improvement in technology 
C) an increase in unemployment 
D) an unexpected decrease in the refining capacity for oil 
E) an increase in the capital stock

Question 4

Figure 9.7  Alt text for Figure 9.7: In figure 9.7, a graph comparing real GDP and price level.
Long description for Figure 9.7: The x-axis is labelled, real GDP (trillions of dollars), with values 11.0, 11.8, 12.1 marked.The y-axis is labelled, price level, with values 110 and 112 marked.6 lines are shown; SRAS1, SRAS2, AD1, AD2, LRAS1, LRAS2.Line SRAS1 begins near the bottom left and slopes up to the top right corner.Line SRAS2 follows the same slope as line SRAS1, but is plotted to the right.The area between lines SRAS1 and SRAS2 is indicated by a right pointing arrow.Line AD1 begins at the top left corner and slopes down toward the bottom center.Line AD2 follows the same slope as AD1, but is plotted to the right.The area between lines AD1 and AD2 is indicated by a right pointing arrow.Line LRAS1 is perpendicular to the x-axis, and begins from value 11.0.Line LRAS2 perpendicular to the x-axis, and begins from point 12.1.The area between lines LRAS1 and LRAS2 is indicated by a right pointing arrow.Line LRAS1 intersects lines AD1 and SRAS1 at point A (11.0, 110).Lines AD2 and SRAS2 intersect at point B (11.8, 112).Points A and B are connected to their respective coordinates on the x-axis and y-axis with dotted lines.Line LRAS2 intersects lines SRAS1 and SRAS2 on the right end of these lines.Similarly, line LRAS2 intersects lines AD1 and AD2 on the right end of these lines.
-Refer to Figure 9.7.Given the economy is at point A in year 1, what is the inflation rate between year 1 and year 2?

Accepted Answer

A) 0.9% 
B) 1.8% 
C) 2.7% 
D) 3.0% 
E) 10%

Question 5

A decrease in aggregate demand in the economy will have what effect on macroeconomic equilibrium in the long run?

Accepted Answer

A) The price level will fall, and the level of GDP will be unaffected. 
B) The price level will fall, and the level of GDP will fall. 
C) The price level will rise, and the level of GDP will fall. 
D) The price level will rise, and the level of GDP will be unaffected. 
E) The price level will fall, and the long-run level of GDP will become more sensitive to changes in the price level.

Question 6

The level of real GDP in the long run is

Accepted Answer

A) potential GDP. 
B) affected by changes in the price level. 
C) determined solely by aggregate demand. 
D) the same as the level of nominal GDP in the long run. 
E) the maximum possible GDP in any given period.

Question 7

An increase in disposable income will shift the aggregate demand curve to the right.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following correctly describes the automatic mechanism through which the economy adjusts to long-run equilibrium?

Accepted Answer

A) the leftward shift of the short-run aggregate supply curve that occurs after a recession 
B) the rightward shift of the short-run aggregate supply curve that occurs after a recession 
C) the leftward shift of the aggregate demand curve that occurs after a recession 
D) the rightward shift of the aggregate demand curve that occurs after a recession 
E) the rightward shift of the long-run aggregate supply curve that occurs after a recession

Question 9

In the dynamic aggregate demand and aggregate supply model, what is the result of aggregate demand increasing faster than potential real GDP?

Accepted Answer

The answer of In the dynamic aggregate demand and aggregate...

Question 10

If full-employment GDP is equal to $1.9 trillion and the current price level is 130, what does the long-run aggregate supply curve look like?

Accepted Answer

A) It is a horizontal line at 130 of real GDP. 
B) It is a vertical line at a level of real GDP below $1.9 trillion. 
C) It is a vertical line at $1.9 trillion of real GDP. 
D) It is a vertical line at a price level of 130. 
E) It is a horizontal line at a price level of 130.

Question 11

Explain how "menu costs" affect the slope of the short-run aggregate supply curve.

Accepted Answer

The answer of Explain how "menu costs" affect the slope...

Question 12

Figure 9.1  Alt text for Figure 9.1: In figure 9.1, a graph comparing real GDP and price level.
Long description for Figure 9.1: The x-axis is labelled, real GDP, and the y-axis is labelled, price level, with 0 at the vertex.Line AD1 begins in the top left corner and slopes down to the bottom center.Line AD2 follows the same slope as line AD1 but is plotted to the right.Points A and B are plotted along line AD1.Point A is a little less than half way along the left side of the line, and point B is little more than half way on the right side of the line.
-Refer to Figure 9.1.Ceteris paribus, an increase in the price level would be represented by a movement from

Accepted Answer

A) AD1 to AD2. 
B) AD2 to AD1. 
C) point A to point B. 
D) point B to point A.

Question 13

Why does the short-run aggregate supply curve shift to the left in the long run, following an increase in aggregate demand?

Accepted Answer

A) Workers and firms adjust their expectations of wages and prices downward, and they accept lower wages and prices. 
B) Workers and firms adjust their expectations of wages and prices downward, and they push for higher wages and prices. 
C) Workers and firms adjust their expectations of wages and prices upward, and they push for higher wages and prices. 
D) Workers and firms adjust their expectations of wages and prices upward, and they accept lower wages and prices. 
E) Workers and firms adjust their expectations of output downward, firms accept lower profits, and workers accept lower wages.

Question 14

Which of the following was not a cause the Canadian recession of 2008-2009?

Accepted Answer

A) the recession in the U.S. 
B) the collapse of the Canadian housing market 
C) the global financial crisis 
D) the rapid drop in commodity prices 
E) a decline in global interbank lending

Question 15

The invention of the integrated circuit by Jack Kilby of Texas Instruments gave rise to the information age.What did this technological change do to the short-run supply curve?

Accepted Answer

A) It shifted the short-run aggregate supply curve to the left. 
B) It shifted the short-run aggregate supply curve to the right. 
C) It moved the economy up along a stationary short-run aggregate supply curve. 
D) It moved the economy down along a stationary short-run aggregate supply curve. 
E) It made the short-run aggregate supply curve flatter.

Question 16

Which of the following will shift the aggregate demand curve to the right, ceteris paribus?

Accepted Answer

A) an increase in interest rates 
B) a decrease in disposable income 
C) a decrease in expected profits for firms 
D) an increase in net exports 
E) an decrease in government spending

Question 17

Explain how each of the following events would affect the long-run aggregate supply curve.
a.a lower price level
b.a decrease in the labour force
c.a decrease in the quantity of capital goods
d.technological change

Accepted Answer

The answer of Explain how each of the following events...

Question 18

A decrease in aggregate demand causes a decrease in ________ only in the short run, but causes a decrease in ________ in both the short run and the long run.

Accepted Answer

A) the price level; real GDP 
B) real GDP; real GDP 
C) the price level; the price level 
D) real GDP; the price level 
E) unemployment; real GDP

Question 19

Figure 9.1  Alt text for Figure 9.1: In figure 9.1, a graph comparing real GDP and price level.
Long description for Figure 9.1: The x-axis is labelled, real GDP, and the y-axis is labelled, price level, with 0 at the vertex.Line AD1 begins in the top left corner and slopes down to the bottom center.Line AD2 follows the same slope as line AD1 but is plotted to the right.Points A and B are plotted along line AD1.Point A is a little less than half way along the left side of the line, and point B is little more than half way on the right side of the line.
-Refer to Figure 9.1.Ceteris paribus, an increase in personal income taxes would be represented by a movement from

Accepted Answer