Question 1

The long-run trend in real GDP is upward.How is this possible given business cycles? What explains the upward trend?

Accepted Answer

There are occasional short-lived periods...

Question 2

Which statement best describes what happens when the price level rises?

Accepted Answer

A)   Households increase foreign bond purchases,and the supply of dollars increases.
B)   Households increase foreign bond purchases,and the supply of dollars decreases.
C)   Households decrease foreign bond purchases,and the supply of dollars increases.
D)   Households decrease foreign bond purchases,and the supply of dollars decreases.E) A) and B)
F) A) and C)

Question 3

Why is the long-run aggregate-supply curve vertical?

Accepted Answer

A)   because population grows slowly
B)   because the government controls inflation
C)   because money is neutral
D)   because prices are stableE) A) and B)
F) None of the above

Question 4

Which term refers to a short period of falling incomes and rising unemployment?

Accepted Answer

A)   depression
B)   recession
C)   expansion
D)   business cycleE) All of the above
F) A) and D)

Question 5

Which of the following shifts the short-run aggregate and the long-run aggregate supply left?

Accepted Answer

A)   a decrease in the price level
B)   a decrease in the expected price level
C)   a decrease in the availability of natural resources
D)   a decrease in the money supplyE) C) and D)
F) A) and B)

Question 6

Which of the following is NOT a reason for the Bank of Canada and the government to keep a close watch on the housing market?

Accepted Answer

A)   the potential effect on consumption spending caused by large decreases in housing prices
B)   the financial consequences to mortgage holders if interest rates rise
C)   the financial consequences to mortgage holders if house prices suddenly drop
D)   the financial consequences to mortgage holders if house prices suddenly riseE) A) and B)
F) A) and C)

Question 7

Which of the following shifts the short-run aggregate supply to the left?

Accepted Answer

A)   an increase in the price level
B)   an increase in the expected price level
C)   an increase in the capital stock
D)   an increase in the money supplyE) B) and C)
F) None of the above

Question 8

According to the aggregate demand and aggregate supply model,in the long run what is the impact of an increase in the money supply?

Accepted Answer

A)   It lowers both the price level and real GDP.
B)   It increases GDP,but it does not change the price level.
C)   It increases the price level,but it does not change real GDP.
D)   It increases both the price level and real GDP.E) B) and D)
F) B) and C)

Question 9

Suppose the economy is initially in long-run equilibrium.Which statement best describes the state of the economy after an increase in aggregate demand?

Accepted Answer

A)   Prices and output are higher.
B)   Prices and output are lower.
C)   Prices are higher and output is the same.
D)   Prices are the same and output is lower.E) A) and D)
F) C) and D)

Question 10

The explanations for the slopes of the aggregate-demand and aggregate-supply curves are the same as the explanations for the slope of demand and supply curves for specific goods and services.

Accepted Answer

A) True 
 B)False

Question 11

Suppose that there has been bad weather resulting in a temporary decrease in the availability of oil and the economy has reached its new short-run equilibrium.What happens as the economy moves from this short-run equilibrium to long-run equilibrium?

Accepted Answer

A)   Prices and output rise.
B)   Prices and output fall.
C)   Prices rise and output falls.
D)   Prices fall and output rises.E) A) and B)
F) C) and D)

Question 12

An aggregate-supply curve is described by the equation Y=80 + 0.5P.The expected price level is 100.How much is the long-run level of output?

Accepted Answer

The standard form of a short-run aggrega...

Question 13

Which of the following would cause stagflation?

Accepted Answer

A)   aggregate demand shifts right
B)   aggregate demand shifts left
C)   aggregate supply shifts right
D)   aggregate supply shifts leftE) None of the above
F) C) and D)

Question 14

How does Canadian aggregate demand change if the dollar appreciates or other countries experience recessions?

Accepted Answer

A)   Aggregate demand shifts right.
B)   Aggregate demand shifts left.
C)   If the dollar appreciates,aggregate demand shifts right; if other countries experience recessions,aggregate demand shifts left.
D)   If the dollar appreciates,aggregate demand shifts left; if other countries experience recessions,aggregate demand shifts right.E) A) and B)
F) A) and C)

Question 15

What are the effects of a decrease in the price level?

Accepted Answer

A)   People hold less money,so they lend less,and the interest rate rises.
B)   People hold less money,so they lend more,and the interest rate falls.
C)   People hold more money,so they lend more,and the interest rate rises.
D)   People hold more money,so they lend less,and the interest rate falls.E) None of the above
F) All of the above

Question 16

Scenario 14-1
The economy is in long-run equilibrium.Suddenly,due to improved international relations,a boom experienced by a major trading partner,and the increased confidence of policymakers,citizens become more optimistic about the future and stay this way for a long time.
-Refer to the Scenario 14-1.How does the new long-run equilibrium differ from the original one?

Accepted Answer

A)   Both the price level and real GDP are higher.
B)   Both the price level and real GDP are lower.
C)   The price level is the same and real GDP is higher.
D)   The price level is higher and real GDP is the same.E) C) and D)
F) A) and C)

Question 17

Use the sticky-wage theory to explain why an increase in the expected price level shifts the aggregate-supply curve.

Accepted Answer

When people expect the price l...

Exam 14: Aggregate Demand and Aggregate Supply

The long-run trend in real GDP is upward.How is this possible given business cycles? What explains the upward trend?

Correct Answer
verified
There are occasional short-lived periods...
View Answer

Which term refers to a short period of falling incomes and rising unemployment?

Correct Answer
verified

What are the effects of a decrease in the price level?

Correct Answer
verified

Use the sticky-wage theory to explain why an increase in the expected price level shifts the aggregate-supply curve.

Correct Answer
verified
When people expect the price l...
View Answer

An aggregate-supply curve is described by the equation Y=80 + 0.5P.The expected price level is 100.How much is the long-run level of output?

Correct Answer
verified
The standard form of a short-run aggrega...
View Answer

Which of the following shifts the short-run aggregate supply to the left?

Correct Answer
verified

How does Canadian aggregate demand change if the dollar appreciates or other countries experience recessions?

Correct Answer
verified

Which of the following is NOT a reason for the Bank of Canada and the government to keep a close watch on the housing market?

Correct Answer
verified

Which of the following shifts the short-run aggregate and the long-run aggregate supply left?

Correct Answer
verified

Which statement best describes what happens when the price level rises?

Correct Answer
verified

Why is the long-run aggregate-supply curve vertical?

Correct Answer
verified

Suppose that there has been bad weather resulting in a temporary decrease in the availability of oil and the economy has reached its new short-run equilibrium.What happens as the economy moves from this short-run equilibrium to long-run equilibrium?

Correct Answer
verified

According to the aggregate demand and aggregate supply model,in the long run what is the impact of an increase in the money supply?

Correct Answer
verified

The explanations for the slopes of the aggregate-demand and aggregate-supply curves are the same as the explanations for the slope of demand and supply curves for specific goods and services.

Correct Answer
verified

Correct Answer
verified

Suppose the economy is initially in long-run equilibrium.Which statement best describes the state of the economy after an increase in aggregate demand?

Correct Answer
verified

Which of the following would cause stagflation?

Correct Answer
verified

Exam 14: Aggregate Demand and Aggregate Supply

The long-run trend in real GDP is upward.How is this possible given business cycles? What explains the upward trend?

Correct AnswerverifiedThere are occasional short-lived periods...View AnswerShow Answer

Which term refers to a short period of falling incomes and rising unemployment?

Correct AnswerverifiedShow Answer

What are the effects of a decrease in the price level?

Correct AnswerverifiedShow Answer

Use the sticky-wage theory to explain why an increase in the expected price level shifts the aggregate-supply curve.

Correct AnswerverifiedWhen people expect the price l...View AnswerShow Answer

An aggregate-supply curve is described by the equation Y=80 + 0.5P.The expected price level is 100.How much is the long-run level of output?

Correct AnswerverifiedThe standard form of a short-run aggrega...View AnswerShow Answer

Which of the following shifts the short-run aggregate supply to the left?

Correct AnswerverifiedShow Answer

How does Canadian aggregate demand change if the dollar appreciates or other countries experience recessions?

Correct AnswerverifiedShow Answer

Which of the following is NOT a reason for the Bank of Canada and the government to keep a close watch on the housing market?

Correct AnswerverifiedShow Answer

Which of the following shifts the short-run aggregate and the long-run aggregate supply left?

Correct AnswerverifiedShow Answer

Which statement best describes what happens when the price level rises?

Correct AnswerverifiedShow Answer

Why is the long-run aggregate-supply curve vertical?

Correct AnswerverifiedShow Answer

Suppose that there has been bad weather resulting in a temporary decrease in the availability of oil and the economy has reached its new short-run equilibrium.What happens as the economy moves from this short-run equilibrium to long-run equilibrium?

Correct AnswerverifiedShow Answer

According to the aggregate demand and aggregate supply model,in the long run what is the impact of an increase in the money supply?

Correct AnswerverifiedShow Answer

The explanations for the slopes of the aggregate-demand and aggregate-supply curves are the same as the explanations for the slope of demand and supply curves for specific goods and services.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose the economy is initially in long-run equilibrium.Which statement best describes the state of the economy after an increase in aggregate demand?

Correct AnswerverifiedShow Answer

Which of the following would cause stagflation?

Correct AnswerverifiedShow Answer

Correct Answer
verified
There are occasional short-lived periods...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
When people expect the price l...
View Answer

Correct Answer
verified
The standard form of a short-run aggrega...
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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified