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Which statement best characterizes the long-run aggregate-supply curve?


A) It is determined by the things that determine output in the classical model.
B) It is located at the point where unemployment is zero.
C) It shifts to the right when the price level increases.
D) It is positioned at the point where the economy would cease to grow.

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Suppose the economy is in long-run equilibrium. If there is a sharp decline in the stock market combined with a significant increase in immigration of skilled workers, what would we expect to happen in the short run?


A) Real GDP will rise, and the price level might rise, fall, or stay the same.
B) Real GDP will fall, and the price level might rise, fall, or stay the same.
C) The price level will rise, and real GDP might rise, fall, or stay the same.
D) The price level will fall, and real GDP might rise, fall, or stay the same.

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Use the misperceptions theory to discuss the economic forces that shift the aggregate-supply curve when the expectations about the overall price level change.

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According to the misperceptions theory, ...

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Technological progress shifts the long-run aggregate-supply curve to the right.

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Which of the following shifts aggregate demand to the right?


A) a decrease in the money supply
B) a decrease in net exports at every exchange rate
C) a decrease in prices
D) a decrease in imports

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Which of the following shifts aggregate demand to the right?


A) a decrease in the money supply
B) technological improvement that increases the profitability of capital investments
C) the repeal of an investment tax credit
D) a decrease in the price level

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An increase in the money supply raises output in the long run.

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Which statement is consistent with the theory of aggregate supply?


A) An increase in the expected price level shifts the short-run aggregate-supply curve to the right, and an increase in the actual price level shifts the short-run aggregate supply to the right.
B) An increase in the expected price level shifts the short-run aggregate-supply curve to the right, and an increase in the actual price level does not shift the short-run aggregate supply.
C) An increase in the expected price level shifts the short-run aggregate-supply curve to the left, and an increase in the actual price level shifts the short-run aggregate supply to the left.
D) An increase in the expected price level shifts the short-run aggregate-supply curve to the left, and an increase in the actual price level does not shift the short-run aggregate supply.

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We could explain continued increases in both output and the price level by supposing that only long-run aggregate supply shifted right over time.

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

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Changes in the price level affect which component of aggregate demand?


A) only consumption and investment
B) only consumption and net exports
C) only consumption
D) consumption, investment, and net exports

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


A) an increase in the minimum wage
B) an increase in immigration from abroad
C) an increase in the price of oil
D) an increase in the actual price level

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Increased output and prices in Canada in the early 1940s was mostly the result of increased government expenditures.

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How much has Canada changed its oil consumption since the first OPEC price shock in 1973?


A) increased by 20%
B) decreased by 30%
C) increased by 40%
D) decreased by more than 50%

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Aggregate demand shifts to the left if the money supply decreases.

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How do changes in the price of oil affect economies?


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.

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When taxes increase, consumption decreases. How is this situation represented in the aggregate demand and aggregate supply model?


A) by a movement to the left along a given aggregate-demand curve
B) by shifting aggregate demand to the left
C) by shifting aggregate supply to the left
D) by a movement to the right along a given aggregate-demand curve

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Figure 14-1 Figure 14-1 -Refer to the Figure 14-1. How would an increase in the money supply move the economy in the long run? A) from C to A B) from C to B C) from C to A to C again D) from C to D Figure 14-1 -Refer to the Figure 14-1. How would an increase in the money supply move the economy in the long run? A) from C to A B) from C to B C) from C to A to C again D) from C to D -Refer to the Figure 14-1. How would an increase in the money supply move the economy in the long run?


A) from C to A
B) from C to B
C) from C to A to C again
D) from C to D

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


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

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In the 1970s people had become accustomed to high inflation. In 1979, the Bank of Canada decided to fight inflation and decreased the money supply growth rates. Many people thought that the Bank of Canada's action would cause a recession. Is this thinking consistent with the aggregate demand and aggregate supply model? Explain. According to monetary misperceptions theory, what should have happened to output if the inflation rate fell relative to what people expected? Explain.

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The decrease in the money supply would s...

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