Question 1

Which of the following explains why production rises in most years?

Accepted Answer

A)  increases in prices of goods and services 
B)  increases in stock prices 
C)  aging population 
D)  technological innovation 
A)  increases in prices of goods and services 
B)  increases in stock prices 
C)  aging population 
D)  technological innovation

Question 2

What are the implications of a depreciation of the dollar?

Accepted Answer

A)  The dollar buys more foreign currency, so it buys more foreign goods. 
B)  The dollar buys more foreign currency, so it buys fewer foreign goods. 
C)  The dollar buys less foreign currency, so it buys more foreign goods. 
D)  The dollar buys less foreign currency, so it buys fewer foreign goods. 
A)  The dollar buys more foreign currency, so it buys more foreign goods. 
B)  The dollar buys more foreign currency, so it buys fewer foreign goods. 
C)  The dollar buys less foreign currency, so it buys more foreign goods. 
D)  The dollar buys less foreign currency, so it buys fewer foreign goods.

Question 3

Figure 14-1  
-Refer to Figure 14-1. In the short run, what would result from a favourable shift in aggregate supply?

Accepted Answer

A)  It would move the economy from A to B. 
B)  It would move the economy from B to C. 
C)  It would move the economy from C to D. 
D)  It would move the economy from D to A. 
A)  It would move the economy from A to B. 
B)  It would move the economy from B to C. 
C)  It would move the economy from C to D. 
D)  It would move the economy from D to A.

Question 4

Stagflation would result from the aggregate-supply curve shifting left.

Accepted Answer

A) True 
 B)False

Question 5

What could create a decrease in the price level and a reduction in real GDP?

Accepted Answer

A)  an increase in interest rates 
B)  a war in the Middle East 
C)  declining immigration 
D)  tax rebates 
A)  an increase in interest rates 
B)  a war in the Middle East 
C)  declining immigration 
D)  tax rebates

Question 6

Like real GDP, investment fluctuates, but investment fluctuates by a larger percentage.

Accepted Answer

A) True 
 B)False

Question 7

What was one of the major reasons why the United States was slower to recover from the 2008-2009 recession than Canada?

Accepted Answer

A)  Housing price declines in Canadian were much larger than in the United States. 
B)  Housing price declines in the United States were much larger than in Canada. 
C)  The impact of the rise in house prices on Canadian household consumption was greater. 
D)  The impact of the rise in house prices on American household consumption was greater. 
A)  Housing price declines in Canadian were much larger than in the United States. 
B)  Housing price declines in the United States were much larger than in Canada. 
C)  The impact of the rise in house prices on Canadian household consumption was greater. 
D)  The impact of the rise in house prices on American household consumption was greater.

Question 8

What was one of the major reasons why the United States was slower to recover from the 2008-2009 recession than Canada?

Accepted Answer

A)  Housing price increases in Canadian were much larger than in the United States. 
B)  Housing price increases in the United States were much larger than in Canada. 
C)  The impact of the fall in house prices on Canadian household consumption was greater. 
D)  The impact of the fall in house prices on American household consumption was greater. 
A)  Housing price increases in Canadian were much larger than in the United States. 
B)  Housing price increases in the United States were much larger than in Canada. 
C)  The impact of the fall in house prices on Canadian household consumption was greater. 
D)  The impact of the fall in house prices on American household consumption was greater.

Question 9

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. 
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.

Question 10

All else equal, what happens as the price level increases?

Accepted Answer

A)  The money supply falls. 
B)  Interest rates rise. 
C)  Dollars become more valuable. 
D)  Dollars become less valuable. 
A)  The money supply falls. 
B)  Interest rates rise. 
C)  Dollars become more valuable. 
D)  Dollars become less valuable.

Question 11

What would happen to Canadian net exports and aggregate demand if countries that imported from Canada went into recession?

Accepted Answer

A)  Net exports would rise, and aggregate demand would shift right. 
B)  Net exports would rise, and aggregate demand would shift left. 
C)  Net exports would fall, and aggregate demand would shift right. 
D)  Net exports would fall, and aggregate demand would shift left. 
A)  Net exports would rise, and aggregate demand would shift right. 
B)  Net exports would rise, and aggregate demand would shift left. 
C)  Net exports would fall, and aggregate demand would shift right. 
D)  Net exports would fall, and aggregate demand would shift left.

Question 12

Why does a decrease in the price level induce an increase in the aggregate quantity of goods and services demanded?

Accepted Answer

A)  because as wealth falls, interest rates rise, and the dollar appreciates 
B)  because as wealth falls, interest rates rise, and the dollar depreciates 
C)  because as wealth rises, interest rates rise, and the dollar appreciates 
D)  because as wealth rises, interest rates fall, and the dollar depreciates 
A)  because as wealth falls, interest rates rise, and the dollar appreciates 
B)  because as wealth falls, interest rates rise, and the dollar depreciates 
C)  because as wealth rises, interest rates rise, and the dollar appreciates 
D)  because as wealth rises, interest rates fall, and the dollar depreciates

Question 13

Which situation would induce a shift of the aggregate demand to the right?

Accepted Answer

A)  price level and government expenditures decreased 
B)  price level decreased, and the government instituted an investment tax credit 
C)  stock prices and the money supply increased 
D)  bank rate increased, and the dollar appreciated 
A)  price level and government expenditures decreased 
B)  price level decreased, and the government instituted an investment tax credit 
C)  stock prices and the money supply increased 
D)  bank rate increased, and the dollar appreciated

Question 14

What would cause prices and real GDP to rise in the short run?

Accepted Answer

A)  an increase in the expected price level 
B)  an increase in the money supply 
C)  a decrease in the capital stock 
D)  an import tariff 
A)  an increase in the expected price level 
B)  an increase in the money supply 
C)  a decrease in the capital stock 
D)  an import tariff

Question 15

Because not all prices adjust instantly to changing conditions, an unexpected fall in the price level leaves some firms with higher-than-desired prices, and these higher-than-desired prices depress sales and induce firms to reduce the quantity of goods and services they produce.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A)  if the government were to increase the minimum wage 
B)  if the government were to increase the number of import tariffs 
C)  if the government were to raise taxes on investment spending 
D)  if the government were to increase immigration 
A)  if the government were to increase the minimum wage 
B)  if the government were to increase the number of import tariffs 
C)  if the government were to raise taxes on investment spending 
D)  if the government were to increase immigration

Question 17

What happens when the dollar depreciates?

Accepted Answer

A)  Net exports increase, and aggregate demand shifts right. 
B)  Net exports increase, and aggregate demand shifts left. 
C)  Net exports decrease, and aggregate demand shifts right. 
D)  Net exports decrease, and aggregate demand shifts left. 
A)  Net exports increase, and aggregate demand shifts right. 
B)  Net exports increase, and aggregate demand shifts left. 
C)  Net exports decrease, and aggregate demand shifts right. 
D)  Net exports decrease, and aggregate demand shifts left.

Question 18

What did The General Theory, a 1936 book by John Maynard Keynes, attempt to explain?

Accepted Answer

A)  stagflation 
B)  the long-run effects of government policies 
C)  short-run economic fluctuations 
D)  how changes in the money supply had created the Great Depression 
A)  stagflation 
B)  the long-run effects of government policies 
C)  short-run economic fluctuations 
D)  how changes in the money supply had created the Great Depression

Question 19

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

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. 
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.

Question 20

An aggregate-supply (AS) curve is described by the equation Y = YLR + a × (P - PEXP), where Y is current output, YLR is the long run level of output, a is a positive constant, P is the current price level, and PEXP is the expected price level. Suppose YLR = 50, a = 1, and PEXP = 40.
​
a. Draw the long-run aggregate-supply curve in an AD - AS (aggregate demand - aggregate supply) diagram.
​
b. Using the AS equation, find the output corresponding to price levels P = 40 and P = 80 and place the 2 points on your diagram. Draw the short-run AS curve that passes through the two points.
​
c. Identify the expected price level on your graph.
​
d. Suppose the expected price level decreases to PEXP = 30. For current price levels P = 40 and P = 60, recalculate the output levels using the AS formula. Draw the new AS curve and identify the new expected price level.

Accepted Answer

a. The long-run aggregate-supply curve i

Which of the following explains why production rises in most years?

What are the implications of a depreciation of the dollar?

Figure 14-1 -Refer to Figure 14-1. In the short run, what would result from a favourable shift in aggregate supply?

Stagflation would result from the aggregate-supply curve shifting left.

What could create a decrease in the price level and a reduction in real GDP?

Like real GDP, investment fluctuates, but investment fluctuates by a larger percentage.

What was one of the major reasons why the United States was slower to recover from the 2008-2009 recession than Canada?

What was one of the major reasons why the United States was slower to recover from the 2008-2009 recession than Canada?

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

All else equal, what happens as the price level increases?

What would happen to Canadian net exports and aggregate demand if countries that imported from Canada went into recession?

Why does a decrease in the price level induce an increase in the aggregate quantity of goods and services demanded?

Which situation would induce a shift of the aggregate demand to the right?

What would cause prices and real GDP to rise in the short run?

Because not all prices adjust instantly to changing conditions, an unexpected fall in the price level leaves some firms with higher-than-desired prices, and these higher-than-desired prices depress sales and induce firms to reduce the quantity of goods and services they produce.

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

What happens when the dollar depreciates?

What did The General Theory, a 1936 book by John Maynard Keynes, attempt to explain?

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

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Small Open Economy

The Influence of Monetary Policy on Aggregate Demand

The Influence of Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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Exam 14: Aggregate Demand and Aggregate Supply

Which of the following explains why production rises in most years?

What are the implications of a depreciation of the dollar?

Figure 14-1 -Refer to Figure 14-1. In the short run, what would result from a favourable shift in aggregate supply?

Stagflation would result from the aggregate-supply curve shifting left.

What could create a decrease in the price level and a reduction in real GDP?

Like real GDP, investment fluctuates, but investment fluctuates by a larger percentage.

What was one of the major reasons why the United States was slower to recover from the 2008-2009 recession than Canada?

What was one of the major reasons why the United States was slower to recover from the 2008-2009 recession than Canada?

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

All else equal, what happens as the price level increases?

What would happen to Canadian net exports and aggregate demand if countries that imported from Canada went into recession?

Why does a decrease in the price level induce an increase in the aggregate quantity of goods and services demanded?

Which situation would induce a shift of the aggregate demand to the right?

What would cause prices and real GDP to rise in the short run?

Because not all prices adjust instantly to changing conditions, an unexpected fall in the price level leaves some firms with higher-than-desired prices, and these higher-than-desired prices depress sales and induce firms to reduce the quantity of goods and services they produce.

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

What happens when the dollar depreciates?

What did The General Theory, a 1936 book by John Maynard Keynes, attempt to explain?

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

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Small Open Economy

The Influence of Monetary Policy on Aggregate Demand

The Influence of Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

Filters