Question 1

The "Yes - Markets Self-Adjust" camp argues that a negative demand shock results in

Accepted Answer

A)  increased saving and rising interest rates. 
B)  decreased saving and rising interest rates. 
C)  rising output prices, reducing the excess supply of products and services. 
D)  falling wages, reducing the quantity of labour supplied. 
E)  rising wages, reducing the quantity of labour demanded.

Question 2

The best measure of "growth in living standards" is increasing real GDP.

Accepted Answer

A) True 
 B)False

Question 3

When a Canadian student loses $1,000 at a casino in Las Vegas, aggregate demand in Canada decreases.

Accepted Answer

A) True 
 B)False

Question 4

After a negative demand shock, the "Yes - Markets Self-Adjust" camp argues that all of the following will happen except,

Accepted Answer

A)  export spending increases due to a lower Canadian price level. 
B)  interest rates fall, increasing business investment spending. 
C)  wages rise due to excess demand for labour. 
D)  import spending decreases due to a lower Canadian price level. 
E)  wages fall due to excess supply of labour.

Question 5

A Federal Government program that gives ten-year work visas to international students graduating from Canadian colleges and universities increases short-run aggregate supply.

Accepted Answer

A) True 
 B)False

Question 6

Increases in the quality of inputs that do not affect the quantity of those inputs increase both long-run and short-run aggregate supply.

Accepted Answer

A) True 
 B)False

Question 7

A higher world price for oil is a negative supply shock.

Accepted Answer

A) True 
 B)False

Question 8

When the exchange rate falls, the average price level rises and unemployment decreases.

Accepted Answer

A) True 
 B)False

Question 9

The short run is a period of time shorter than 10 years.

Accepted Answer

A) True 
 B)False

Question 10

The long-run aggregate supply curve (LAS) is vertical because

Accepted Answer

A)  the quantity of potential real GDP does not change when the price level changes. 
B)  real GDP can never be greater than potential GDP. 
C)  businesses do not have any incentive to produce more than potential GDP. 
D)  the price level does not change when the quantity of potential real GDP changes. 
E)  potential GDP never changes.

Question 11

Demand shocks move unemployment and inflation in

Accepted Answer

A)  the same directions, as the Phillips Curve suggests. 
B)  opposite directions, as the Phillips Curve suggests. 
C)  the same directions, which is not what the Phillips Curve suggests. 
D)  opposite directions, which is not what the Phillips Curve suggests. 
E)  circles.

Question 12

The "Yes - Markets Self-Adjust" camp argues that

Accepted Answer

A)  expectations are more important than interest rates for business investment decisions. 
B)  most shocks are external to the economy. 
C)  demand shocks are more important than supply shocks for explaining business cycles. 
D)  business expectations are quickly changeable. 
E)  government is the solution to business cycles, not the problem.

Question 13

A positive supply shock raises prices for resource inputs.

Accepted Answer

A) True 
 B)False

Question 14

According to the law of aggregate demand, as the price level rises, aggregate quantity demanded decreases because spending on Canadian products and services by ________ decreases.

Accepted Answer

A)  consumers 
B)  governments 
C)  R.O.W. 
D)  businesses 
E)  consumers and R.O.W.

Question 15

In short-run macroeconomic equilibrium, aggregate quantity demanded equals aggregate quantity supplied equals potential GDP.

Accepted Answer

A) True 
 B)False

Question 16

A rise in the price level

Accepted Answer

A)  increases short-run aggregate supply. 
B)  decreases short-run aggregate supply. 
C)  increases aggregate quantity supplied. 
D)  decreases aggregate quantity supplied. 
E)  decreases aggregate demand.

Question 17

If consumers save some of their income, aggregate demand cannot be equal to short-run aggregate supply.

Accepted Answer

A) True 
 B)False

Question 18

Figure 6.3.1 
-Look at the macro production possibilities frontier in Figure 6.3.1. Which point(s) correspond to points on the long-run aggregate supply (LAS) curve?

Accepted Answer

A)  a only 
B)  b only 
C)  a, b, c 
D)  d only 
E)  e only

Question 19

In the loanable funds market,

Accepted Answer

A)  when interest rates are higher, businesses borrow more money for investment. 
B)  when interest rates are higher, consumers borrow more money for mortgages. 
C)  an increase in consumer savings causes the interest rate to rise. 
D)  savers are the demanders, and borrowers are the suppliers. 
E)  businesses do most of the borrowing to finance investment spending on new factories.

Question 20

When the price level rises, aggregate quantity supplied increases.

Accepted Answer

A) True 
 B)False

Exam 8: Skating to Where the Puck Is Going: Aggregate Supply and Aggregate Demand

The "Yes - Markets Self-Adjust" camp argues that a negative demand shock results in

The best measure of "growth in living standards" is increasing real GDP.

When a Canadian student loses $1,000 at a casino in Las Vegas, aggregate demand in Canada decreases.

After a negative demand shock, the "Yes - Markets Self-Adjust" camp argues that all of the following will happen except,

A Federal Government program that gives ten-year work visas to international students graduating from Canadian colleges and universities increases short-run aggregate supply.

Increases in the quality of inputs that do not affect the quantity of those inputs increase both long-run and short-run aggregate supply.

A higher world price for oil is a negative supply shock.

When the exchange rate falls, the average price level rises and unemployment decreases.

The short run is a period of time shorter than 10 years.

The long-run aggregate supply curve (LAS) is vertical because

Demand shocks move unemployment and inflation in

The "Yes - Markets Self-Adjust" camp argues that

A positive supply shock raises prices for resource inputs.

According to the law of aggregate demand, as the price level rises, aggregate quantity demanded decreases because spending on Canadian products and services by ________ decreases.

In short-run macroeconomic equilibrium, aggregate quantity demanded equals aggregate quantity supplied equals potential GDP.

A rise in the price level

If consumers save some of their income, aggregate demand cannot be equal to short-run aggregate supply.

Figure 6.3.1 -Look at the macro production possibilities frontier in Figure 6.3.1. Which point(s) correspond to points on the long-run aggregate supply (LAS) curve?

In the loanable funds market,

When the price level rises, aggregate quantity supplied increases.