Question 1

What happens to sales and profit during recessions?

Accepted Answer

A)  sales and profits fall
B)  sales and profits rise
C)  sales rise and profits fall
D)  profits fall and sales riseE) A) and C)
F) A) and B)

Question 2

Which of the following government actions will shift the aggregate demand left?

Accepted Answer

A)  a decrease in taxes
B)  cuts in military expenditures
C)  signing a free trade agreement
D)  repealing an import tariffE) A) and B)
F) A) and C)

Question 3

Which of the following 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.E) A) and D)
F) B) and C)

Question 4

Which of the following shifts aggregate demand to the right?

Accepted Answer

A)  The federal government reduces purchases of new weapons.
B)  The Bank of Canada buys bonds in the open market.
C)  The price level falls.
D)  Net exports fall.E) B) and D)
F) B) and C)

Question 5

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 interest ratesE) A) and B)
F) C) and D)

Question 6

Assuming that a is positive,how are theories of short-run aggregate supply expressed mathematically?

Accepted Answer

A)  quantity of output supplied = natural rate of output + a(actual price level - expected price level) 
B)  quantity of output supplied = natural rate of output + a(expected price level - actual price level) 
C)  quantity of output supplied = a(actual price level - expected price level)  - natural rate of output
D)  quantity of output supplied = a(expected price level - actual price level)  - natural rate of outputE) All of the above
F) A) and C)

Question 7

Scenario 14-2
The economy is in long-run equilibrium. Suddenly, due to corporate scandals, international tensions, 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.Which of the following are consistent with the aggregate demand and aggregate supply theory?

Accepted Answer

A)  The expected price level rises. Bargains are struck for higher increases in wages.
B)  The expected price level rises. Bargains are struck for lower increases in wages.
C)  The expected price level falls. Bargains are struck for higher increases in wages.
D)  The expected price level falls. Bargains are struck for lower increases in wages.E) A) and C)
F) None of the above

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

Suppose the economy was in long-run equilibrium when a sudden decline in the stock market took place.What happens in the short run after the decline in the stock market?

Accepted Answer

A)  Both the price level and real GDP rise.
B)  The price level falls and real GDP does not change.
C)  The price level does not change and real GDP falls.
D)  Both the price level and real GDP fall.E) C) and D)
F) B) and D)

Question 10

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) None of the above
F) A) and B)

Question 11

How are the effects of an increase in the price level that is greater than expected shown in the aggregate demand and aggregate supply model?

Accepted Answer

A)  by shifting the short-run aggregate-supply curve right
B)  by shifting the short-run aggregate-supply curve left
C)  by moving to the right along a given aggregate-supply curve
D)  by moving to the left along a given aggregate-supply curveE) B) and D)
F) B) and C)

Question 12

By how much did the real GDP per person increase during World War II?

Accepted Answer

A)  25 percent
B)  50 percent
C)  60 percent
D)  80 percentE) A) and B)
F) A) and C)

Question 13

What are the effects of an increase 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 falls.
D)  People hold more money, so they lend less, and the interest rate rises.E) C) and D)
F) All of the above

Question 14

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

Accepted Answer

A)  The real interest rate increases, the dollar appreciates, and net exports increase.
B)  The real interest rate increases, the dollar depreciates, and net exports decrease.
C)  The real interest rate decreases, the dollar depreciates, and net exports increase.
D)  The real interest rate decreases, the dollar appreciates, and net exports decrease.E) B) and D)
F) C) and D)

Question 15

Figure 14-1
 
-Refer to the Figure 14-1.Which of the following paths indicates how the economy would move to long run equilibrium?

Accepted Answer

A)  from A to B
B)  from C to B
C)  from D to C
D)  From C to AE) A) and D)
F) C) and D)

Question 16

A decrease in the price level makes consumers feel wealthier,so they purchase more.This logic helps explain why the aggregate demand curve slopes downward.

Accepted Answer

A) True 
 B)False

Question 17

What happened in the first few years of the Great Depression?

Accepted Answer

A)  Unemployment rose by about 10 percent, and prices rose about 27 percent.
B)  Unemployment rose by about 19 percent, and prices rose about 12 percent.
C)  Unemployment rose by about 20 percent, and prices fell about 12 percent.
D)  Unemployment rose by about 21 percent, and prices fell about 19 percent.E) A) and B)
F) A) and C)

Question 18

What is the effect of bad weather for farming or some other temporary decrease in the availability of raw materials?

Accepted Answer

A)  Aggregate supply shifts right.
B)  Output falls in the short run.
C)  Prices fall in the short run.
D)  Long-run aggregate supply shifts to the left.E) B) and C)
F) A) and B)

Question 19

In which of the following situations are people most likely to spend more?

Accepted Answer

A)  when their real wealth and interest rates rise
B)  when their real wealth rises and interest rates fall
C)  when their real wealth falls and interest rates rise
D)  when their real wealth and interest rates fallE) B) and C)
F) B) and D)

Question 20

Figure 14-1
 
-Refer to the Figure 14-1.In the short run,which of the following 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.E) A) and B)
F) None of the above

Exam 14: Aggregate Demand and Aggregate Supply

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

Correct Answer
verified

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

Correct Answer
verified

Suppose the economy was in long-run equilibrium when a sudden decline in the stock market took place.What happens in the short run after the decline in the stock market?

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

What happens to sales and profit during recessions?

Correct Answer
verified

Correct Answer
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Which of the following shifts aggregate demand to the right?

Correct Answer
verified

What are the effects of an increase in the price level?

Correct Answer
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By how much did the real GDP per person increase during World War II?

Correct Answer
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Figure 14-1 -Refer to the Figure 14-1.In the short run,which of the following would result from a favourable shift in aggregate supply?

Correct Answer
verified

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

Correct Answer
verified

What is the effect of bad weather for farming or some other temporary decrease in the availability of raw materials?

Correct Answer
verified

How are the effects of an increase in the price level that is greater than expected shown in the aggregate demand and aggregate supply model?

Correct Answer
verified

What happened in the first few years of the Great Depression?

Correct Answer
verified

A decrease in the price level makes consumers feel wealthier,so they purchase more.This logic helps explain why the aggregate demand curve slopes downward.

Correct Answer
verified

Assuming that a is positive,how are theories of short-run aggregate supply expressed mathematically?

Correct Answer
verified

Which of the following government actions will shift the aggregate demand left?

Correct Answer
verified

Figure 14-1 -Refer to the Figure 14-1.Which of the following paths indicates how the economy would move to long run equilibrium?

Correct Answer
verified

In which of the following situations are people most likely to spend more?

Correct Answer
verified

Exam 14: Aggregate Demand and Aggregate Supply

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose the economy was in long-run equilibrium when a sudden decline in the stock market took place.What happens in the short run after the decline in the stock market?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

What happens to sales and profit during recessions?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following shifts aggregate demand to the right?

Correct AnswerverifiedShow Answer

What are the effects of an increase in the price level?

Correct AnswerverifiedShow Answer

By how much did the real GDP per person increase during World War II?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

What is the effect of bad weather for farming or some other temporary decrease in the availability of raw materials?

Correct AnswerverifiedShow Answer

How are the effects of an increase in the price level that is greater than expected shown in the aggregate demand and aggregate supply model?

Correct AnswerverifiedShow Answer

What happened in the first few years of the Great Depression?

Correct AnswerverifiedShow Answer

A decrease in the price level makes consumers feel wealthier,so they purchase more.This logic helps explain why the aggregate demand curve slopes downward.

Correct AnswerverifiedShow Answer

Assuming that a is positive,how are theories of short-run aggregate supply expressed mathematically?

Correct AnswerverifiedShow Answer

Which of the following government actions will shift the aggregate demand left?

Correct AnswerverifiedShow Answer

Figure 14-1 -Refer to the Figure 14-1.Which of the following paths indicates how the economy would move to long run equilibrium?

Correct AnswerverifiedShow Answer

In which of the following situations are people most likely to spend more?

Correct AnswerverifiedShow Answer

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