Question 1

Assuming that a is positive,how are theories of short-run aggregate supply expressed mathematically?

Accepted Answer

A)   quantity of output supplied = natural rate of output + a(actual price level - expected price level) 
B)   quantity of output supplied = natural rate of output + a(expected price level - actual price level) 
C)   quantity of output supplied = a(actual price level - expected price level) - natural rate of output
D)   quantity of output supplied = a(expected price level - actual price level) - natural rate of outputE) A) and B)
F) B) and D)

Question 2

In which situation would the long-run aggregate-supply curve shift left?

Accepted Answer

A)   if the capital stock increases
B)   if there is a hurricane
C)   if the government removes some environmental regulations that limit production methods
D)   if trade barriers are removedE) A) and B)
F) A) and C)

Question 3

Suppose that a decrease in the demand for goods and services pushes the economy into recession.What happens to the price level? If the government does nothing,what ensures that the economy still eventually gets back to the natural rate of output?

Accepted Answer

A decrease in aggregate demand causes th...

Question 4

Which of the following shifts aggregate demand to the left?

Accepted Answer

A)   the price level rises.
B)   the price level falls.
C)   the dollar depreciates.
D)   the prices of stocks fall.E) A) and B)
F) B) and D)

Question 5

An increase in which of the following (assuming the increase was not due to a price level change) shifts aggregate demand to the right?

Accepted Answer

A)   interest rates
B)   immigration
C)   government surplus
D)   net exportsE) A) and B)
F) A) and C)

Question 6

What typically rises during a recession?

Accepted Answer

A)   the price level
B)   unemployment
C)   corporate profits
D)   automobile salesE) All of the above
F) B) and D)

Question 7

Suppose a stock market crash makes people feel less wealthy.What are the effects of this decrease in wealth?

Accepted Answer

A)   a decrease in consumption,which shifts aggregate supply left
B)   a decrease in consumption,which shifts aggregate demand left
C)   an increase in consumption,which shifts aggregate supply right
D)   an increase in consumption,which shifts aggregate demand rightE) B) and C)
F) All of the above

Question 8

Which statement best describes the effects of a fall in the price level?

Accepted Answer

A)   The real exchange rate and interest rates rise.
B)   The real exchange rate and interest rates fall.
C)   The real exchange rate falls,and interest rates rise.
D)   The real exchange rate rises,and interest rates fall.E) All of the above
F) A) and B)

Question 9

What did Keynes believe caused recessions and depressions?

Accepted Answer

A)   excess aggregate demand
B)   inadequate aggregate demand
C)   excess aggregate supply
D)   inadequate aggregate supplyE) A) and D)
F) All of the above

Question 10

Which of the following shifts the short-run,but not the long-run,aggregate supply right?

Accepted Answer

A)   a decrease in the price level
B)   a decrease in the expected price level
C)   a decrease in the natural rate of unemployment
D)   a decrease in the savings rateE) None of the above
F) B) and C)

Question 11

In which situation would the long-run aggregate-supply curve shift right?

Accepted Answer

A)   if technology improves
B)   if the price level decreases
C)   if the price of oil increases
D)   if the money supply increasesE) None of the above
F) B) and D)

Question 12

What is one explanation for the instability of oil prices?

Accepted Answer

A)   inefficient production techniques that have made it unprofitable to develop oil
B)   fluctuations in the inflation rate in major economies
C)   pressure from environmental groups to reduce carbon emissionsD expansion in the market for Canadian oil due to new pipeline constructionD) None of the above
E) All of the above

Question 13

Suppose the economy is in long-run equilibrium.In a short span of time,there is a decline in the money supply,a tax increase,a pessimistic revision of expectations about future business conditions,and a rise in the value of the dollar.In the short run,what would we expect to happen?

Accepted Answer

A)   The price level and real GDP will both rise.
B)   The price level and real GDP will both fall.
C)   The price level and real GDP will both stay the same.
D)   The price level will increase,and the real GDP will fall.E) A) and B)
F) A) and C)

Question 14

An economy is described by the aggregate-demand curve Y=70-P and the short-run the aggregate-supply curve Y=10+2P.
a)If the economy is in long-run equilibrium,what are the long-run level of output,the actual,and the expected price level?
b)Suppose consumers' confidence in the economy declines so that the aggregate demand declines by 10 percent.Calculate the new short-run equilibrium.What is the rate of change in output induced by the decline in confidence? What is the inflation rate?
c)After a while,when some people observe the reduced economic activity and unemployment rises,they accept lower wages.Calculate the long-run output and price level.

Accepted Answer

a)If the economy is in equilibrium,the s...

Question 15

What happened during World War II?

Accepted Answer

A)   Government purchases of goods and services increased.
B)   The real GDP per person decreased by 60 percent.
C)   The unemployment rate increased to 15 percent.
D)   More resources were devoted to the production of consumer goods.E) B) and D)
F) C) and D)

Question 16

In 1982,Canada was in a recession.What would you expect NOT to have happened?

Accepted Answer

A)   layoffs and firings
B)   a higher rate of foreclosures
C)   increased claims for unemployment insurance
D)   increased investment spendingE) All of the above
F) B) and D)

Question 17

In the 1970s people had become accustomed to high inflation.In 1979,the Bank of Canada decided to fight inflation and decreased the money supply growth rates.Many people thought that the Bank of Canada's action would cause a recession.Is this thinking consistent with the aggregate demand and aggregate supply model? Explain.According to monetary misperceptions theory,what should have happened to output if the inflation rate fell relative to what people expected? Explain.

Accepted Answer

The decrease in the money supply would s...

Question 18

When did the recession that saw the largest spike in the unemployment rate in Canada begin?

Accepted Answer

A)   1979
B)   1982
C)   1991
D)   2008E) A) and D)
F) None of the above

Question 19

Suppose the economy is in long-run equilibrium.If there is a sharp increase in the minimum wage as well as an increase in pessimism about future business conditions,what would we expect to happen?

Accepted Answer

A)   In the short run,real GDP will rise,and the price level might rise,fall,or stay the same.In the long run,the price level might rise,fall,or stay the same,but real GDP will be unaffected.
B)   In the short run,real GDP will fall,and the price level might rise,fall,or stay the same.In the long run,the price level might rise,fall,or stay the same,but real GDP will be unaffected.
C)   In the short run,real GDP will rise,and the price level might rise,fall,or stay the same.In the long run,the price level might rise,fall,or stay the same,but real GDP will be lower.
D)   In the short run,real GDP will fall,and the price level might rise,fall,or stay the same.In the long run,the price level might rise,fall,or stay the same,but real GDP will be lower.E) B) and D)
F) A) and B)

Question 20

Most economists use the aggregate demand and aggregate supply model primarily to analyze which of the following?

Accepted Answer

A)   short-run fluctuations in the economy
B)   the effects of macroeconomic policy on the prices of individual goods
C)   the long-run effects of international trade policies
D)   productivity and economic growthE) All of the above
F) None of the above

Exam 14: Aggregate Demand and Aggregate Supply

In 1982,Canada was in a recession.What would you expect NOT to have happened?

Correct Answer
verified

Assuming that a is positive,how are theories of short-run aggregate supply expressed mathematically?

Correct Answer
verified

Correct Answer
verified
The decrease in the money supply would s...
View Answer

When did the recession that saw the largest spike in the unemployment rate in Canada begin?

Correct Answer
verified

Suppose the economy is in long-run equilibrium.If there is a sharp increase in the minimum wage as well as an increase in pessimism about future business conditions,what would we expect to happen?

Correct Answer
verified

What happened during World War II?

Correct Answer
verified

What typically rises during a recession?

Correct Answer
verified

Which statement best describes the effects of a fall in the price level?

Correct Answer
verified

Suppose a stock market crash makes people feel less wealthy.What are the effects of this decrease in wealth?

Correct Answer
verified

Which of the following shifts aggregate demand to the left?

Correct Answer
verified

Suppose that a decrease in the demand for goods and services pushes the economy into recession.What happens to the price level? If the government does nothing,what ensures that the economy still eventually gets back to the natural rate of output?

Correct Answer
verified
A decrease in aggregate demand causes th...
View Answer

Which of the following shifts the short-run,but not the long-run,aggregate supply right?

Correct Answer
verified

In which situation would the long-run aggregate-supply curve shift right?

Correct Answer
verified

Most economists use the aggregate demand and aggregate supply model primarily to analyze which of the following?

Correct Answer
verified

In which situation would the long-run aggregate-supply curve shift left?

Correct Answer
verified

What did Keynes believe caused recessions and depressions?

Correct Answer
verified

Suppose the economy is in long-run equilibrium.In a short span of time,there is a decline in the money supply,a tax increase,a pessimistic revision of expectations about future business conditions,and a rise in the value of the dollar.In the short run,what would we expect to happen?

Correct Answer
verified

What is one explanation for the instability of oil prices?

Correct Answer
verified

An increase in which of the following (assuming the increase was not due to a price level change) shifts aggregate demand to the right?

Correct Answer
verified

Correct Answer
verified
a)If the economy is in equilibrium,the s...
View Answer

Exam 14: Aggregate Demand and Aggregate Supply

In 1982,Canada was in a recession.What would you expect NOT to have happened?

Correct AnswerverifiedShow Answer

Assuming that a is positive,how are theories of short-run aggregate supply expressed mathematically?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe decrease in the money supply would s...View AnswerShow Answer

When did the recession that saw the largest spike in the unemployment rate in Canada begin?

Correct AnswerverifiedShow Answer

Suppose the economy is in long-run equilibrium.If there is a sharp increase in the minimum wage as well as an increase in pessimism about future business conditions,what would we expect to happen?

Correct AnswerverifiedShow Answer

What happened during World War II?

Correct AnswerverifiedShow Answer

What typically rises during a recession?

Correct AnswerverifiedShow Answer

Which statement best describes the effects of a fall in the price level?

Correct AnswerverifiedShow Answer

Suppose a stock market crash makes people feel less wealthy.What are the effects of this decrease in wealth?

Correct AnswerverifiedShow Answer

Which of the following shifts aggregate demand to the left?

Correct AnswerverifiedShow Answer

Suppose that a decrease in the demand for goods and services pushes the economy into recession.What happens to the price level? If the government does nothing,what ensures that the economy still eventually gets back to the natural rate of output?

Correct AnswerverifiedA decrease in aggregate demand causes th...View AnswerShow Answer

Which of the following shifts the short-run,but not the long-run,aggregate supply right?

Correct AnswerverifiedShow Answer

In which situation would the long-run aggregate-supply curve shift right?

Correct AnswerverifiedShow Answer

Most economists use the aggregate demand and aggregate supply model primarily to analyze which of the following?

Correct AnswerverifiedShow Answer

In which situation would the long-run aggregate-supply curve shift left?

Correct AnswerverifiedShow Answer

What did Keynes believe caused recessions and depressions?

Correct AnswerverifiedShow Answer

Suppose the economy is in long-run equilibrium.In a short span of time,there is a decline in the money supply,a tax increase,a pessimistic revision of expectations about future business conditions,and a rise in the value of the dollar.In the short run,what would we expect to happen?

Correct AnswerverifiedShow Answer

What is one explanation for the instability of oil prices?

Correct AnswerverifiedShow Answer

An increase in which of the following (assuming the increase was not due to a price level change) shifts aggregate demand to the right?

Correct AnswerverifiedShow Answer

Correct Answerverifieda)If the economy is in equilibrium,the s...View AnswerShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The decrease in the money supply would s...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A decrease in aggregate demand causes th...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
a)If the economy is in equilibrium,the s...
View Answer