Question 1

Assuming a constant level of aggregate demand,what is included in the short-run effects of an adverse supply shock?

Accepted Answer

A) a decrease in the price level and a decrease in real output 
B) an increase in the price level and an increase in real output 
C) a decrease in the price level and an increase in real output 
D) an increase in the price level and a decrease in real output 
A) a decrease in the price level and a decrease in real output 
B) an increase in the price level and an increase in real output 
C) a decrease in the price level and an increase in real output 
D) an increase in the price level and a decrease in real output

Question 2

What will a sharp fall in oil prices cause?

Accepted Answer

A) a recessionary gap 
B) an inflationary gap 
C) a contractionary gap 
D) an equilibrium gap 
A) a recessionary gap 
B) an inflationary gap 
C) a contractionary gap 
D) an equilibrium gap

Question 3

In the short run,what is the impact of demand-pull inflation on real output and the price level?

Accepted Answer

A) It decreases both real output and the price level. 
B) It increases the price level but not real output. 
C) It increases real output but not the price level. 
D) It increases both real output and the price level. 
A) It decreases both real output and the price level. 
B) It increases the price level but not real output. 
C) It increases real output but not the price level. 
D) It increases both real output and the price level.

Question 4

If wheat prices fell by 2 percent when producers thought other prices were falling by 5 percent,what would be the effect on wheat output?

Accepted Answer

A) We could not predict the likely change in wheat output that would result. 
B) It would tend to rise as a result. 
C) It would tend to remain unchanged as a result. 
D) It would tend to fall as a result. 
A) We could not predict the likely change in wheat output that would result. 
B) It would tend to rise as a result. 
C) It would tend to remain unchanged as a result. 
D) It would tend to fall as a result.

Question 5

Which of the following best describes the relationship between the LRAS curve and real output levels?

Accepted Answer

A) The LRAS curve is vertical with real output levels that can be either greater than or less than the natural level of real output. 
B) The LRAS curve is upward sloping with real output levels that vary positively with the price level. 
C) The LRAS curve is upward sloping with real output levels that vary negatively with the price level. 
D) The LRAS curve is vertical with real output levels that are equal to the natural level of real output at all price levels. 
A) The LRAS curve is vertical with real output levels that can be either greater than or less than the natural level of real output. 
B) The LRAS curve is upward sloping with real output levels that vary positively with the price level. 
C) The LRAS curve is upward sloping with real output levels that vary negatively with the price level. 
D) The LRAS curve is vertical with real output levels that are equal to the natural level of real output at all price levels.

Question 6

What is the profit effect?

Accepted Answer

A) At equilibrium prices, when costs rise, profit margins are able to float with them and be passed along. 
B) When the price level rises, output prices rise relative to input prices (costs), raising producers' short-run profit margins. 
C) When the price level decreases, output prices rise relative to input prices (costs), raising producers' short-run profit margins. 
D) It is only a long-run phenomenon. 
A) At equilibrium prices, when costs rise, profit margins are able to float with them and be passed along. 
B) When the price level rises, output prices rise relative to input prices (costs), raising producers' short-run profit margins. 
C) When the price level decreases, output prices rise relative to input prices (costs), raising producers' short-run profit margins. 
D) It is only a long-run phenomenon.

Question 7

What would a policy designed to permanently reduce unemployment below its natural rate require?

Accepted Answer

A) a one-time increase in the price level 
B) an ongoing increase in inflation rates over time 
C) a permanent decrease in taxes 
D) a one-time increase in aggregate demand 
A) a one-time increase in the price level 
B) an ongoing increase in inflation rates over time 
C) a permanent decrease in taxes 
D) a one-time increase in aggregate demand

Question 8

What is the typical response of firms to an increase in the price of what they sell,for given input prices?

Accepted Answer

A) There is no change in the profit level of firms. 
B) There is a decrease in employment in the industry. 
C) There is an increase in hiring factors of production. 
D) There is no change in output in the short run. 
A) There is no change in the profit level of firms. 
B) There is a decrease in employment in the industry. 
C) There is an increase in hiring factors of production. 
D) There is no change in output in the short run.

Question 9

Figure 9-4
  
-Refer to Figure 9-4.Which of the following statements best describes output in relation to desired spending at Y₂?

Accepted Answer

A) Output is greater than desired spending, and inventories will rise. 
B) Output is less than desired spending, and inventories will fall. 
C) Output is greater than desired spending, and real wealth will fall. 
D) Output is less than desired spending, and governments must decrease spending. 
A) Output is greater than desired spending, and inventories will rise. 
B) Output is less than desired spending, and inventories will fall. 
C) Output is greater than desired spending, and real wealth will fall. 
D) Output is less than desired spending, and governments must decrease spending.

Question 10

When there is a temporary sharp increase in the price of oil,which curves will shift left?

Accepted Answer

A) both SRAS and LRAS 
B) SRAS 
C) LRAS 
D) neither SRAS nor LRAS 
A) both SRAS and LRAS 
B) SRAS 
C) LRAS 
D) neither SRAS nor LRAS

Question 11

How did Canada respond to the OPEC tightening of the world oil supply in the 1970s?

Accepted Answer

The rising price level of oil,initiated

Question 12

What must the government do in order to maintain real output above its natural level for a sustained period of time?

Accepted Answer

A) Bring about repeated increases in the level of aggregate demand. 
B) Bring about a one-shot permanent increase in aggregate demand. 
C) Increase aggregate demand and then maintain the new level of demand. 
D) Shift the aggregate demand curve to the right and then allow aggregate demand to slowly decrease. 
A) Bring about repeated increases in the level of aggregate demand. 
B) Bring about a one-shot permanent increase in aggregate demand. 
C) Increase aggregate demand and then maintain the new level of demand. 
D) Shift the aggregate demand curve to the right and then allow aggregate demand to slowly decrease.

Question 13

When the price of cotton has risen 12 percent,how could the misperception effect lead cotton producers to increase their output when they otherwise would not have?

Accepted Answer

A) if input prices have risen 12 percent 
B) if overall prices have risen 4 percent 
C) if overall prices have risen 20 percent 
D) if overall prices have risen 12 percent 
A) if input prices have risen 12 percent 
B) if overall prices have risen 4 percent 
C) if overall prices have risen 20 percent 
D) if overall prices have risen 12 percent

Question 14

Which of the following statements best illustrates a correct shift of the short run aggregate supply curve?

Accepted Answer

A) The short-run aggregate supply curve is shifted rightward by an increase in the price of any input, and it is shifted leftward by a decrease. 
B) The short-run aggregate supply curve is shifted rightward by a technological breakthrough that increases the productivity of the labour force. 
C) The short-run aggregate supply curve is shifted leftward by a decrease in the price of any input, and it is shifted rightward by an increase. 
D) The short-run aggregate supply curve is shifted leftward by an increase of skilled workers in the labour force. 
A) The short-run aggregate supply curve is shifted rightward by an increase in the price of any input, and it is shifted leftward by a decrease. 
B) The short-run aggregate supply curve is shifted rightward by a technological breakthrough that increases the productivity of the labour force. 
C) The short-run aggregate supply curve is shifted leftward by a decrease in the price of any input, and it is shifted rightward by an increase. 
D) The short-run aggregate supply curve is shifted leftward by an increase of skilled workers in the labour force.

Question 15

Which of the following could begin an episode of demand-pull inflation?

Accepted Answer

A) an increase in oil prices 
B) an decrease in consumer optimism 
C) a faster rate of economic growth by a major trading partner country 
D) expectations of lower rates of return in investment 
A) an increase in oil prices 
B) an decrease in consumer optimism 
C) a faster rate of economic growth by a major trading partner country 
D) expectations of lower rates of return in investment

Question 16

According to the "misperception effect" explanation of short-run aggregate supply,firms increase output as the price level rises because they mistake the increase in overall prices for an increase in the relative price of their own output.

Accepted Answer

A) True 
 B)False

Question 17

If the current price of steel rises but there is no change in steel industry capacity,the LRAS will not fall as a result.

Accepted Answer

A) True 
 B)False

Question 18

Starting from long-run equilibrium,what will an increase in aggregate demand cause?

Accepted Answer

A) a recessionary gap in the short run 
B) a recessionary gap in the short run and the long run 
C) an inflationary gap in the short run and the long run 
D) an inflationary gap in the short run 
A) a recessionary gap in the short run 
B) a recessionary gap in the short run and the long run 
C) an inflationary gap in the short run and the long run 
D) an inflationary gap in the short run

Question 19

Starting from long-run equilibrium,what will a decrease in aggregate demand cause?

Accepted Answer

A) a recessionary gap in the short run and the long run 
B) an inflationary gap in the short run and the long run 
C) a recessionary gap in the short run 
D) an inflationary gap in the short run 
A) a recessionary gap in the short run and the long run 
B) an inflationary gap in the short run and the long run 
C) a recessionary gap in the short run 
D) an inflationary gap in the short run

Question 20

Starting from long-run equilibrium,what impact will an increase in aggregate demand have?

Accepted Answer

A) It will cause an inflationary gap. 
B) It will shift the LRAS to the right. 
C) It will increase unemployment. 
D) It will result in a lower price level. 
A) It will cause an inflationary gap. 
B) It will shift the LRAS to the right. 
C) It will increase unemployment. 
D) It will result in a lower price level.

Assuming a constant level of aggregate demand,what is included in the short-run effects of an adverse supply shock?

What will a sharp fall in oil prices cause?

In the short run,what is the impact of demand-pull inflation on real output and the price level?

If wheat prices fell by 2 percent when producers thought other prices were falling by 5 percent,what would be the effect on wheat output?

Which of the following best describes the relationship between the LRAS curve and real output levels?

What is the profit effect?

What would a policy designed to permanently reduce unemployment below its natural rate require?

What is the typical response of firms to an increase in the price of what they sell,for given input prices?

Figure 9-4 -Refer to Figure 9-4.Which of the following statements best describes output in relation to desired spending at Y₂?

When there is a temporary sharp increase in the price of oil,which curves will shift left?

How did Canada respond to the OPEC tightening of the world oil supply in the 1970s?

What must the government do in order to maintain real output above its natural level for a sustained period of time?

When the price of cotton has risen 12 percent,how could the misperception effect lead cotton producers to increase their output when they otherwise would not have?

Which of the following statements best illustrates a correct shift of the short run aggregate supply curve?

Which of the following could begin an episode of demand-pull inflation?

According to the "misperception effect" explanation of short-run aggregate supply,firms increase output as the price level rises because they mistake the increase in overall prices for an increase in the relative price of their own output.

If the current price of steel rises but there is no change in steel industry capacity,the LRAS will not fall as a result.

Starting from long-run equilibrium,what will an increase in aggregate demand cause?

Starting from long-run equilibrium,what will a decrease in aggregate demand cause?

Starting from long-run equilibrium,what impact will an increase in aggregate demand have?

The Role and Method of Economics

Scarcity, trade-Offs, and Production Possibilities

Supply and Demand

Bringing Supply and Demand Together

Introduction to the Macroeconomy

Measuring Economic Performance

Economic Growth in the Global Economy

Aggregate Demand

Fiscal Policy

Money and the Banking System

The Bank of Canada

Monetary Policy

International Trade

International Finance

Filters

Exam 9: Aggregate Supply and Macroeconomic Equilibrium

Assuming a constant level of aggregate demand,what is included in the short-run effects of an adverse supply shock?

What will a sharp fall in oil prices cause?

In the short run,what is the impact of demand-pull inflation on real output and the price level?

If wheat prices fell by 2 percent when producers thought other prices were falling by 5 percent,what would be the effect on wheat output?

Which of the following best describes the relationship between the LRAS curve and real output levels?

What is the profit effect?

What would a policy designed to permanently reduce unemployment below its natural rate require?

What is the typical response of firms to an increase in the price of what they sell,for given input prices?

Figure 9-4 -Refer to Figure 9-4.Which of the following statements best describes output in relation to desired spending at Y₂?

When there is a temporary sharp increase in the price of oil,which curves will shift left?

How did Canada respond to the OPEC tightening of the world oil supply in the 1970s?

What must the government do in order to maintain real output above its natural level for a sustained period of time?

When the price of cotton has risen 12 percent,how could the misperception effect lead cotton producers to increase their output when they otherwise would not have?

Which of the following statements best illustrates a correct shift of the short run aggregate supply curve?

Which of the following could begin an episode of demand-pull inflation?

According to the "misperception effect" explanation of short-run aggregate supply,firms increase output as the price level rises because they mistake the increase in overall prices for an increase in the relative price of their own output.

If the current price of steel rises but there is no change in steel industry capacity,the LRAS will not fall as a result.

Starting from long-run equilibrium,what will an increase in aggregate demand cause?

Starting from long-run equilibrium,what will a decrease in aggregate demand cause?

Starting from long-run equilibrium,what impact will an increase in aggregate demand have?

The Role and Method of Economics

Scarcity, trade-Offs, and Production Possibilities

Supply and Demand

Bringing Supply and Demand Together

Introduction to the Macroeconomy

Measuring Economic Performance

Economic Growth in the Global Economy

Aggregate Demand

Fiscal Policy

Money and the Banking System

The Bank of Canada

Monetary Policy

International Trade

International Finance

Filters