Question 1

What is the shape of the long-run aggregate supply curve? Why?

Accepted Answer

The long-run aggregate supply curve is v

Question 2

The price of a barrel of oil doubled between 2007 and the middle of 2008. To make matters worse, a financial crisis hit the U.S. economy starting in August of 2007. Which of the following is true of the Chinese experience?

Accepted Answer

A) The worldwide decline in demand led to a collapse of Chinese exports. 
B) Instead of relying solely on the economy's self-correcting mechanism, much more aggressive fiscal expansions than those of the U.S. (in addition to a substantial monetary easing) served to shift the AD curve back to general equilibrium relatively quickly. 
C) The Chinese economy was better able than the U.S. economy to weather the financial crisis with output growth starting to grow earlier and more quickly than that of the U.S. 
D) All of the above. 
E) None of the above. 
A) The worldwide decline in demand led to a collapse of Chinese exports. 
B) Instead of relying solely on the economy's self-correcting mechanism, much more aggressive fiscal expansions than those of the U.S. (in addition to a substantial monetary easing) served to shift the AD curve back to general equilibrium relatively quickly. 
C) The Chinese economy was better able than the U.S. economy to weather the financial crisis with output growth starting to grow earlier and more quickly than that of the U.S. 
D) All of the above. 
E) None of the above.

Question 3

The total quantity of final goods and services offered for sale at different price levels is ________.

Accepted Answer

A) the aggregate supply curve 
B) the aggregate demand curve 
C) the 45° line 
D) A and D only. 
A) the aggregate supply curve 
B) the aggregate demand curve 
C) the 45° line 
D) A and D only.

Question 4

Suppose the Canadian economy is producing at the natural rate of output. An appreciation of the Canadian dollar will cause ________ in real GDP in the short run and ________ in the aggregate price level in the long run, everything else held constant. (Assume the appreciation causes no effects in the supply side of the economy.)

Accepted Answer

A) an increase; an increase 
B) a decrease; a decrease 
C) no change; an increase 
D) no change; a decrease 
A) an increase; an increase 
B) a decrease; a decrease 
C) no change; an increase 
D) no change; a decrease

Question 5

The long-run aggregate supply curve is ________.

Accepted Answer

A) a vertical line through the non-inflationary rate of output 
B) a vertical line through the current level of output 
C) a vertical line through the natural rate level of output 
D) a horizontal line through the current level of output 
A) a vertical line through the non-inflationary rate of output 
B) a vertical line through the current level of output 
C) a vertical line through the natural rate level of output 
D) a horizontal line through the current level of output

Question 6

Aggregate demand and supply analysis can be used ________.

Accepted Answer

A) to examine the effects of macroeconomic shocks on prices 
B) to build the LM curve 
C) as an alternative to IS LM model 
D) to value real assets in the long run 
A) to examine the effects of macroeconomic shocks on prices 
B) to build the LM curve 
C) as an alternative to IS LM model 
D) to value real assets in the long run

Question 7

Explain through the component parts of aggregate demand why the aggregate demand curve slopes down with respect to the inflation rate. Be sure to discuss two channels through which changes in inflation rates affect demand.

Accepted Answer

A fall in the inflation rate lowers real

Question 8

Explain why the short-run aggregate supply curve has a positive slope.

Accepted Answer

Because wages and prices take time to ad

Question 9

Prior to the financial crisis in 2007-2008, the Chinese economy was growing at ________ per year.

Accepted Answer

A) 10 percent 
B) 15 percent 
C) 20 percent 
D) 25 percent 
A) 10 percent 
B) 15 percent 
C) 20 percent 
D) 25 percent

Question 10

Everything else held constant, expansionary monetary policies will cause ________.

Accepted Answer

A) the quantity of aggregate demand to increase 
B) the quantity of aggregate demand to decrease 
C) aggregate demand to decrease 
D) aggregate demand to increase 
A) the quantity of aggregate demand to increase 
B) the quantity of aggregate demand to decrease 
C) aggregate demand to decrease 
D) aggregate demand to increase

Question 11

Explain how the modern Phillips curve and the short-run aggregate supply curve are related to each other.

Accepted Answer

The Phillips curve holds that the inflat

Question 12

Everything else held constant, an increase in net exports ________ aggregate ________.

Accepted Answer

A) increases; demand 
B) decreases; demand 
C) decreases; supply 
D) increases; supply 
A) increases; demand 
B) decreases; demand 
C) decreases; supply 
D) increases; supply

Question 13

As of 2009, China's economy had recovered from the global recession that began in 2008. Use aggregate demand and aggregate supply analysis to explain why, and to explain the likely consequences for China of an increase in the growth rate of the global economy.

Accepted Answer

Policy in China reversed the decline in

Question 14

The aggregate demand curve is the total quantity of an economy's ________.

Accepted Answer

A) intermediate goods demanded at different inflation rates 
B) intermediate goods demanded at a particular inflation rate 
C) final goods and services demanded at a particular inflation rate 
D) final goods and services demanded at different inflation rates 
A) intermediate goods demanded at different inflation rates 
B) intermediate goods demanded at a particular inflation rate 
C) final goods and services demanded at a particular inflation rate 
D) final goods and services demanded at different inflation rates

Question 15

Which of the following statements best describes Okun's law?

Accepted Answer

A) For each 1% that output is greater than potential output, the unemployment rate is 0.5% below the natural rate of unemployment. 
B) For each 1% that output is greater than potential output, the unemployment rate is 0.5% above the natural rate of unemployment. 
C) For each 0.5% that output is lower than potential output, the unemployment rate is 1% below the natural rate of unemployment. 
D) For each 0.5% that output is lower than potential output, the unemployment rate is 1% above the natural rate of unemployment. 
A) For each 1% that output is greater than potential output, the unemployment rate is 0.5% below the natural rate of unemployment. 
B) For each 1% that output is greater than potential output, the unemployment rate is 0.5% above the natural rate of unemployment. 
C) For each 0.5% that output is lower than potential output, the unemployment rate is 1% below the natural rate of unemployment. 
D) For each 0.5% that output is lower than potential output, the unemployment rate is 1% above the natural rate of unemployment.

Question 16

Figure 24-1 
  
-In Figure 24.1, output levels below Yn will cause the aggregate ________ function to shift to the ________.

Accepted Answer

A) supply; right 
B) supply; left 
C) demand; left 
D) A and C only 
A) supply; right 
B) supply; left 
C) demand; left 
D) A and C only

Question 17

The Chinese central bank is ________.

Accepted Answer

A) Hong Kong Shanghai Bank of China 
B) People's Bank of Canada 
C) the People's Republic Bank 
D) Republic of China Central Bank 
A) Hong Kong Shanghai Bank of China 
B) People's Bank of Canada 
C) the People's Republic Bank 
D) Republic of China Central Bank

Question 18

The modern Phillips curve incorporates ________ into the expectations-augmented Phillips curve.

Accepted Answer

A) output gaps 
B) unemployment gaps 
C) supply shocks 
D) inflation 
A) output gaps 
B) unemployment gaps 
C) supply shocks 
D) inflation

Question 19

An unfavourable supply shock causes ________ to ________.

Accepted Answer

A) aggregate demand; increase 
B) aggregate demand; decrease 
C) short-run aggregate supply; decrease 
D) short-run aggregate supply; increase 
A) aggregate demand; increase 
B) aggregate demand; decrease 
C) short-run aggregate supply; decrease 
D) short-run aggregate supply; increase

Question 20

The long-run rate of unemployment to which an economy always gravitates is the ________.

Accepted Answer

A) normal rate of unemployment 
B) natural rate of unemployment 
C) neutral rate of unemployment 
D) inflationary rate of unemployment 
A) normal rate of unemployment 
B) natural rate of unemployment 
C) neutral rate of unemployment 
D) inflationary rate of unemployment

Exam 23: Aggregate Demand and Supply Analysis

What is the shape of the long-run aggregate supply curve? Why?

The price of a barrel of oil doubled between 2007 and the middle of 2008. To make matters worse, a financial crisis hit the U.S. economy starting in August of 2007. Which of the following is true of the Chinese experience?

The total quantity of final goods and services offered for sale at different price levels is ________.

The long-run aggregate supply curve is ________.

Aggregate demand and supply analysis can be used ________.

Explain through the component parts of aggregate demand why the aggregate demand curve slopes down with respect to the inflation rate. Be sure to discuss two channels through which changes in inflation rates affect demand.

Explain why the short-run aggregate supply curve has a positive slope.

Prior to the financial crisis in 2007-2008, the Chinese economy was growing at ________ per year.

Everything else held constant, expansionary monetary policies will cause ________.

Explain how the modern Phillips curve and the short-run aggregate supply curve are related to each other.

Everything else held constant, an increase in net exports ________ aggregate ________.

As of 2009, China's economy had recovered from the global recession that began in 2008. Use aggregate demand and aggregate supply analysis to explain why, and to explain the likely consequences for China of an increase in the growth rate of the global economy.

The aggregate demand curve is the total quantity of an economy's ________.

Which of the following statements best describes Okun's law?

Figure 24-1 -In Figure 24.1, output levels below Yn will cause the aggregate ________ function to shift to the ________.

The Chinese central bank is ________.

The modern Phillips curve incorporates ________ into the expectations-augmented Phillips curve.

An unfavourable supply shock causes ________ to ________.

The long-run rate of unemployment to which an economy always gravitates is the ________.

Why Study Money, Banking, and Financial Markets

An Overview of the Financial System

What Is Money

Understanding Interest Rates

The Behaviour of Interest Rates

The Risk and Term Structure of Interest Rates

The Stock Market, the Theory of Rational Expectations, and the Efficient Market Hypothesis

An Economic Analysis of Financial Structure

Financial Crises

Economic Analysis of Financial Regulation

Banking Industry: Structure and Competition

Banking and the Management of Financial Institutions

Risk Management With Financial Derivatives

Central Banks and the Bank of Canada

The Money Supply Process

Tools of Monetary Policy

The Conduct of Monetary Policy: Strategy and Tactics

The Foreign Exchange Market

The International Financial System

Quantity Theory, Inflation, and the Demand for Money

The Is Curve

The Monetary Policy and Aggregate Demand Curves

Monetary Policy Theory

The Role of Expectations in Monetary Policy

Transmission Mechanisms of Monetary Policy

Financial Crises in Emerging Markets

The ISLM Model

Non-Bank Finance

Filters

Everything else held constant, an increase in net exports aggregate .

Figure 24-1 -In Figure 24.1, output levels below Yn will cause the aggregate function to shift to the .

An unfavourable supply shock causes to .