Question 1

What happens when the dollar depreciates?

Accepted Answer

A)  Canadian exports and imports increase. 
B)  Canadian exports increase,while imports decrease. 
C)  Canadian exports decrease,while imports increase. 
D)  Canadian exports and imports decrease. 
A)  Canadian exports and imports increase. 
B)  Canadian exports increase,while imports decrease. 
C)  Canadian exports decrease,while imports increase. 
D)  Canadian exports and imports decrease.

Question 2

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

Accepted Answer

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

Question 3

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 4

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.In the long-run,how does the change in price expectations created by optimism change the aggregate demand and aggregate supply diagram?

Accepted Answer

A)  The long-run aggregate-supply curve shifts left. 
B)  The long-run aggregate-supply curve shifts right. 
C)  The short-run aggregate-supply curve shifts right. 
D)  The short-run aggregate-supply curve shifts left. 
A)  The long-run aggregate-supply curve shifts left. 
B)  The long-run aggregate-supply curve shifts right. 
C)  The short-run aggregate-supply curve shifts right. 
D)  The short-run aggregate-supply curve shifts left.

Question 5

Which statement best characterizes the aggregate-demand curve?

Accepted Answer

A)  It slopes downward because higher prices cause the exchange rate to depreciate. 
B)  It slopes downward because higher prices cause real wealth to decrease and interest rates to increase. 
C)  It slopes upward because higher prices cause people to increase their production. 
D)  It slopes upward because higher prices cause real wealth to increase and interest rates to decrease. 
A)  It slopes downward because higher prices cause the exchange rate to depreciate. 
B)  It slopes downward because higher prices cause real wealth to decrease and interest rates to increase. 
C)  It slopes upward because higher prices cause people to increase their production. 
D)  It slopes upward because higher prices cause real wealth to increase and interest rates to decrease.

Question 6

According to misperceptions theory,if a firm thought that inflation was going to be 5 percent and actual inflation was 4 percent,how may the firm be affected?

Accepted Answer

A)  It may believe that the relative price has increased,so it would increase production. 
B)  It may believe that the relative price has increased,so it would decrease production. 
C)  It may believe that the relative price has decreased,so it would increase production. 
D)  It may believe that the relative price has decreased,so it would decrease production. 
A)  It may believe that the relative price has increased,so it would increase production. 
B)  It may believe that the relative price has increased,so it would decrease production. 
C)  It may believe that the relative price has decreased,so it would increase production. 
D)  It may believe that the relative price has decreased,so it would decrease production.

Question 7

What are the variables on the vertical and horizontal axes of the aggregate supply and demand curve?

Accepted Answer

A)  the price level and real output 
B)  real output and employment 
C)  unemployment and the inflation rate 
D)  inflation rate and the price level 
A)  the price level and real output 
B)  real output and employment 
C)  unemployment and the inflation rate 
D)  inflation rate and the price level

Question 8

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

Accepted Answer

A)  an increase in price expectations 
B)  an increase in the price level 
C)  an increase in the money supply 
D)  a decrease in the price of oil 
A)  an increase in price expectations 
B)  an increase in the price level 
C)  an increase in the money supply 
D)  a decrease in the price of oil

Question 9

Scenario 14-2
The economy is in long-run equilibrium.Suddenly,due to corporate scandals,a recession experienced by a major trading partner,and the loss of confidence among policymakers,citizens become pessimistic concerning the future.They maintain this level of pessimism for a long time.
-Refer to the Scenario 14-2.Initially,which curve shifts in which direction?

Accepted Answer

A)  AD shifts right. 
B)  AD shifts left. 
C)  Short-run AS shifts left. 
D)  Short-run AS shifts right. 
A)  AD shifts right. 
B)  AD shifts left. 
C)  Short-run AS shifts left. 
D)  Short-run AS shifts right.

Question 10

Consider the following equation where a is a positive number: quantity of output supplied = natural rate of output + a (actual price level - expected price level).What does this equation represent?

Accepted Answer

A)  an upward-sloping short-run aggregate-supply curve 
B)  a vertical long-run supply curve 
C)  a downward-sloping aggregate-demand curve 
D)  an upward-sloping aggregate-demand curve 
A)  an upward-sloping short-run aggregate-supply curve 
B)  a vertical long-run supply curve 
C)  a downward-sloping aggregate-demand curve 
D)  an upward-sloping aggregate-demand curve

Question 11

How do changes in the price of oil affect economies?

Accepted Answer

A)  They lead to increased nominal GDP. 
B)  They do not contribute much to output fluctuations. 
C)  They change the economy principally by changing aggregate demand. 
D)  They may create both inflation and recession. 
A)  They lead to increased nominal GDP. 
B)  They do not contribute much to output fluctuations. 
C)  They change the economy principally by changing aggregate demand. 
D)  They may create both inflation and recession.

Question 12

When would the long-run aggregate-supply curve shift right?

Accepted Answer

A)  when immigration increases or the government makes a substantial increase in the minimum wage 
B)  when immigration decreases or the government abolishes the minimum wage 
C)  when immigration increases or the government abolishes the minimum wage 
D)  when immigration decreases or the government makes a substantial increase in the minimum wage 
A)  when immigration increases or the government makes a substantial increase in the minimum wage 
B)  when immigration decreases or the government abolishes the minimum wage 
C)  when immigration increases or the government abolishes the minimum wage 
D)  when immigration decreases or the government makes a substantial increase in the minimum wage

Question 13

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

Accepted Answer

A)  an increase in the expected price level 
B)  optimism about the future 
C)  an increase in the quantity of labour available 
D)  a decrease in interest rates 
A)  an increase in the expected price level 
B)  optimism about the future 
C)  an increase in the quantity of labour available 
D)  a decrease in interest rates

Question 14

Which relationship does the model of aggregate demand and aggregate supply explain?

Accepted Answer

A)  the relationship between the price and quantity of a particular good 
B)  the relationship between the interest rate and output 
C)  the relationship between wages and employment 
D)  the relationship between real GDP and the price level 
A)  the relationship between the price and quantity of a particular good 
B)  the relationship between the interest rate and output 
C)  the relationship between wages and employment 
D)  the relationship between real GDP and the price level

Question 15

What happens when the price level rises?

Accepted Answer

A)  The value of money rises,and exchange rates and interest rates also rise. 
B)  The value of money rises,while exchange rates and interest rates fall. 
C)  The value of money falls while exchange rates and interest rates rise. 
D)  The value of money falls,and exchange rates and interest rates also fall. 
A)  The value of money rises,and exchange rates and interest rates also rise. 
B)  The value of money rises,while exchange rates and interest rates fall. 
C)  The value of money falls while exchange rates and interest rates rise. 
D)  The value of money falls,and exchange rates and interest rates also fall.

Question 16

What changes are likely to happen in an economy when production costs rise?

Accepted Answer

A)  Output and prices rise. 
B)  Output rises and prices fall. 
C)  Output falls and prices rise. 
D)  Output and prices fall. 
A)  Output and prices rise. 
B)  Output rises and prices fall. 
C)  Output falls and prices rise. 
D)  Output and prices fall.

Question 17

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

Accepted Answer

A)  Dollars are worth more,so people spend more. 
B)  Dollars are worth more,so people spend less. 
C)  Dollars are worth less,so people spend more. 
D)  Dollars are worth less,so people spend less. 
A)  Dollars are worth more,so people spend more. 
B)  Dollars are worth more,so people spend less. 
C)  Dollars are worth less,so people spend more. 
D)  Dollars are worth less,so people spend less.

Question 18

An increase in the money supply shifts the long-run aggregate-supply curve to the right.

Accepted Answer

A) True 
 B)False

Question 19

How does real GDP change over time?

Accepted Answer

A)  It moves in the same direction as unemployment. 
B)  It moves in the same direction as inflation. 
C)  It has a long-term upward trend. 
D)  It is approximately constant because it is measured in constant dollars. 
A)  It moves in the same direction as unemployment. 
B)  It moves in the same direction as inflation. 
C)  It has a long-term upward trend. 
D)  It is approximately constant because it is measured in constant dollars.

Question 20

How do prices change due to an economic contraction that is caused by a shift in aggregate demand?

Accepted Answer

A)  They rise in the short run and rise even more in the long run. 
B)  They rise in the short run and fall back to their original level in the long run. 
C)  They fall in the short run and fall even more in the long run. 
D)  They fall in the short run and rise back to their original level in the long run. 
A)  They rise in the short run and rise even more in the long run. 
B)  They rise in the short run and fall back to their original level in the long run. 
C)  They fall in the short run and fall even more in the long run. 
D)  They fall in the short run and rise back to their original level in the long run.

What happens when the dollar depreciates?

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

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

Which statement best characterizes the aggregate-demand curve?

According to misperceptions theory,if a firm thought that inflation was going to be 5 percent and actual inflation was 4 percent,how may the firm be affected?

What are the variables on the vertical and horizontal axes of the aggregate supply and demand curve?

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

Consider the following equation where a is a positive number: quantity of output supplied = natural rate of output + a (actual price level - expected price level).What does this equation represent?

How do changes in the price of oil affect economies?

When would the long-run aggregate-supply curve shift right?

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

Which relationship does the model of aggregate demand and aggregate supply explain?

What happens when the price level rises?

What changes are likely to happen in an economy when production costs rise?

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

An increase in the money supply shifts the long-run aggregate-supply curve to the right.

How does real GDP change over time?

How do prices change due to an economic contraction that is caused by a shift in aggregate demand?

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 and 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

What happens when the dollar depreciates?

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

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

Which statement best characterizes the aggregate-demand curve?

According to misperceptions theory,if a firm thought that inflation was going to be 5 percent and actual inflation was 4 percent,how may the firm be affected?

What are the variables on the vertical and horizontal axes of the aggregate supply and demand curve?

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

Consider the following equation where a is a positive number: quantity of output supplied = natural rate of output + a (actual price level - expected price level).What does this equation represent?

How do changes in the price of oil affect economies?

When would the long-run aggregate-supply curve shift right?

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

Which relationship does the model of aggregate demand and aggregate supply explain?

What happens when the price level rises?

What changes are likely to happen in an economy when production costs rise?

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

An increase in the money supply shifts the long-run aggregate-supply curve to the right.

How does real GDP change over time?

How do prices change due to an economic contraction that is caused by a shift in aggregate demand?

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 and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

Filters