Question 1

The AD-AS model predicts that a positive AD shock will cause the price level to ___________,from the initial to a new long-run equilibrium level.But the model is silent about how fast the price level will ___________ from the initial to the new level;the model cannot explain ___________.

Accepted Answer

A)   increase;increase;the inflation rate
B)   increase;increase;the price level
C)   decrease;decrease;the inflation rate
D)   increase;increase;stagflation
E)   decrease;decrease;the price level

Question 2

The SRAS is horizontal at a price level of 3.
-According to the AD-AS model,the economy depicted above has a short-run equilibrium output of ___________ and a(n) ___________ gap equal to ___________.

Accepted Answer

A)   650;expansionary;50
B)   500;recessionary;100
C)   600;recessionary;50
D)   650;expansionary;100
E)   600;recessionary;650

Question 3

An economy is characterized by the AD equation P = 210 - 0.02Y,SRAS equation P = 100 and LRAS equation Y* = 6,000.According to the AD-AS model,this economy currently has a(n) ___________ gap of size ___________.In the absence of any change in government policy,the long-run equilibrium price level in this economy will be ___________ and the output level will be 6,000.

Accepted Answer

A)   recessionary;500;90
B)   expansionary;500;110
C)   recessionary;500;120
D)   expansionary;450;90
E)   expansionary;500;90

Question 4

A country's potential output depends on each of the following EXCEPT the

Accepted Answer

A)   size of its labour force.
B)   amount of its capital stock.
C)   price level.
D)   productivity of its technology.
E)   availability of its natural resources.

Question 5

The SRAS is horizontal at a price level of 2.
-According to the AD-AS model,the economy depicted above will achieve a long-run equilibrium state with a price level equal to ___________ and output equal to ___________.

Accepted Answer

A)   2;550
B)   4;550
C)   3;550
D)   4;650
E)   2;650

Question 6

-The data provided in the table suggest that the slope of the short-run Phillips curve is ___________,when the public's expectation of inflation is fixed at 
= 2% and the natural rate of unemployment is at u* = 7%.

Accepted Answer

A)   1.0
B)   - 1.0
C)   0.5
D)   - 0.5
E)   2.0

Question 7

In long-run equilibrium in the AD-AS model,which of the following is true?

Accepted Answer

A)   Y = Y*.
B)   Y > Y*.
C)   Y 
D)   Y Y*. 
C)   Y  Y*.
E)   YY*.

Question 8

When the price level falls,planned aggregate expenditure increases along an AD curve because of the

Accepted Answer

A)   real-balances effect only.
B)   real-balances effect and the Fisher effect.
C)   Fisher effect only.
D)   foreign trade effect only.
E)   real-balances effect and the foreign trade effect.

Question 9

Which of the following will shift the aggregate demand curve to the right?

Accepted Answer

A)   Income taxes are raised.
B)   The government reduces purchases to balance the budget.
C)   Consumers become pessimistic about the future.
D)   A new technology is developed that will increase profits.
E)   Foreign economies fall into recession,reducing their demand for domestic exports.

Question 10

A model that can directly explain what the rate of inflation in the economy will be is the

Accepted Answer

A)   expectations-augmented Phillips curve model.
B)   AD-AS model.
C)   Keynesian cross model.
D)   planned aggregate expenditures model.
E)   stagflation model.

Question 11

The SRAS is horizontal at a price level of 2.
-According to the AD-AS model,the economy depicted above has a short-run equilibrium output of ___________ and a(n) ___________ gap equal to ___________.

Accepted Answer

A)   550;expansionary;50
B)   600;recessionary;0
C)   600;expansionary;50
D)   650;expansionary;100
E)   600;recessionary;100

Question 12

The goal of monetary policy in Canada is to maintain inflation within a range of ___________,with the mean target rate of inflation of ___________.

Accepted Answer

A)   1% to 3%;2%
B)   2% to 4%;3%
C)   0% to 3%;1.5%
D)   1% to 4%;2.5%
E)   0% to 4%;2%

Question 13

Consider an economy initially at long-run equilibrium with output (Y) equal to potential output (Y*) .If the SRAS is positively sloped,then a shift to the right of the AD curve will lead to ___________ in the price level,in the short run.In the long run,the SRAS curve will shift to the ___________ and the equilibrium will be at __________.

Accepted Answer

A)   an increase;left;Y = Y*
B)   a decrease;right;Y > Y*
C)   no change;left;Y = Y*
D)   an increase;right;Y = Y*
E)   a decrease;left;Y > Y*

Question 14

According to the expectations-augmented Phillips curve model,a(n) ___________ revision of the public's expectations of inflation will result in a(n) ___________ shift in the ___________ Phillips curve.

Accepted Answer

A)   upward;upward;long-run
B)   upward;upward;short-run
C)   downward;upward;short-run
D)   upward;downward;short-run
E)   upward;downward;long-run

Question 15

The AD-AS model depicts a self-correcting economy.In the long run,the price level ___________ to eliminate a ___________ gap and ___________ to eliminate a(n) ____________ gap without help from government policies.

Accepted Answer

A)   falls;recessionary;rises;expansionary
B)   rises;recessionary;falls;expansionary
C)   falls;expansionary;rises;recessionary
D)   falls;recessionary;falls;recessionary
E)   rises;expansionary;rises;expansionary

Question 16

In recent decades,the statistical inverse relationship between the inflation rate and the unemployment rate observed during the 1960s appears to have broken down.One explanation for this puzzle is provided by the

Accepted Answer

A)   basic Keynesian model.
B)   AD-AS model.
C)   short-run Phillips curve model.
D)   expectations-augmented Phillips curve model.
E)   planned aggregate expenditure model.

Question 17

-The leftward shift in the aggregate demand (AD) curve,from AD1 to AD2,shown in the diagram above may be caused by a(n)

Accepted Answer

A)   increase in autonomous consumption.
B)   increase in government expenditure on roads and bridges.
C)   decrease in autonomous private investment.
D)   increase in autonomous net exports.
E)   decrease in the interest ratE.

Question 18

The idea that a change in the price level changes the real wealth of people,and therefore their consumption spending,is called the

Accepted Answer

A)   real-balances effect.
B)   saving effect.
C)   consumption effect.
D)   foreign trade effect.
E)   Fisher effect.

Question 19

The leftward shift in the LRAS curve shown in the figure may be caused by

Accepted Answer

A)   an increase in the availability of natural resources.
B)   an increase in the size of the capital stock.
C)   an improvement in technology.
D)   an increase in the size of the labour force.
E)   depletion of natural resources.

Question 20

If everything else is held constant,a decrease in the price level ________ planned aggregate expenditure and __________ short-run equilibrium output.

Accepted Answer

A)   increases;increases
B)   increases;decreases
C)   does not change;does not change
D)   decreases;increases
E)   decreases;decreases

Exam 11: The Economy in the Long Run: an Introduction to Economic Growth

-The leftward shift in the aggregate demand (AD) curve,from AD1 to AD2,shown in the diagram above may be caused by a(n)

Correct Answer
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The SRAS is horizontal at a price level of 2. -According to the AD-AS model,the economy depicted above will achieve a long-run equilibrium state with a price level equal to _ and output equal to _.

Correct Answer
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Correct Answer
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According to the expectations-augmented Phillips curve model,a(n) _____ revision of the public's expectations of inflation will result in a(n) _ shift in the _______ Phillips curve.

Correct Answer
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-The data provided in the table suggest that the slope of the short-run Phillips curve is ___________,when the public's expectation of inflation is fixed at = 2% and the natural rate of unemployment is at u* = 7%.

Correct Answer
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Which of the following will shift the aggregate demand curve to the right?

Correct Answer
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Correct Answer
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The SRAS is horizontal at a price level of 3. -According to the AD-AS model,the economy depicted above has a short-run equilibrium output of _____ and a(n) _ gap equal to _______.

Correct Answer
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The SRAS is horizontal at a price level of 2. -According to the AD-AS model,the economy depicted above has a short-run equilibrium output of _____ and a(n) _ gap equal to _______.

Correct Answer
verified

The idea that a change in the price level changes the real wealth of people,and therefore their consumption spending,is called the

Correct Answer
verified

A model that can directly explain what the rate of inflation in the economy will be is the

Correct Answer
verified

The goal of monetary policy in Canada is to maintain inflation within a range of _,with the mean target rate of inflation of _.

Correct Answer
verified

A country's potential output depends on each of the following EXCEPT the

Correct Answer
verified

The leftward shift in the LRAS curve shown in the figure may be caused by

Correct Answer
verified

The AD-AS model predicts that a positive AD shock will cause the price level to _____,from the initial to a new long-run equilibrium level.But the model is silent about how fast the price level will _ from the initial to the new level;the model cannot explain _______.

Correct Answer
verified

If everything else is held constant,a decrease in the price level planned aggregate expenditure and __ short-run equilibrium output.

Correct Answer
verified

In recent decades,the statistical inverse relationship between the inflation rate and the unemployment rate observed during the 1960s appears to have broken down.One explanation for this puzzle is provided by the

Correct Answer
verified

The AD-AS model depicts a self-correcting economy.In the long run,the price level _____ to eliminate a _ gap and _ to eliminate a(n) ______ gap without help from government policies.

Correct Answer
verified

In long-run equilibrium in the AD-AS model,which of the following is true?

Correct Answer
verified

When the price level falls,planned aggregate expenditure increases along an AD curve because of the

Correct Answer
verified

Exam 11: The Economy in the Long Run: an Introduction to Economic Growth

-The leftward shift in the aggregate demand (AD) curve,from AD1 to AD2,shown in the diagram above may be caused by a(n)

Correct AnswerverifiedShow Answer

The SRAS is horizontal at a price level of 2. -According to the AD-AS model,the economy depicted above will achieve a long-run equilibrium state with a price level equal to ___________ and output equal to ___________.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

According to the expectations-augmented Phillips curve model,a(n) ___________ revision of the public's expectations of inflation will result in a(n) ___________ shift in the ___________ Phillips curve.

Correct AnswerverifiedShow Answer

-The data provided in the table suggest that the slope of the short-run Phillips curve is ___________,when the public's expectation of inflation is fixed at = 2% and the natural rate of unemployment is at u* = 7%.

Correct AnswerverifiedShow Answer

Which of the following will shift the aggregate demand curve to the right?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The SRAS is horizontal at a price level of 3. -According to the AD-AS model,the economy depicted above has a short-run equilibrium output of ___________ and a(n) ___________ gap equal to ___________.

Correct AnswerverifiedShow Answer

The SRAS is horizontal at a price level of 2. -According to the AD-AS model,the economy depicted above has a short-run equilibrium output of ___________ and a(n) ___________ gap equal to ___________.

Correct AnswerverifiedShow Answer

The idea that a change in the price level changes the real wealth of people,and therefore their consumption spending,is called the

Correct AnswerverifiedShow Answer

A model that can directly explain what the rate of inflation in the economy will be is the

Correct AnswerverifiedShow Answer

The goal of monetary policy in Canada is to maintain inflation within a range of ___________,with the mean target rate of inflation of ___________.

Correct AnswerverifiedShow Answer

A country's potential output depends on each of the following EXCEPT the

Correct AnswerverifiedShow Answer

The leftward shift in the LRAS curve shown in the figure may be caused by

Correct AnswerverifiedShow Answer

The AD-AS model predicts that a positive AD shock will cause the price level to ___________,from the initial to a new long-run equilibrium level.But the model is silent about how fast the price level will ___________ from the initial to the new level;the model cannot explain ___________.

Correct AnswerverifiedShow Answer

If everything else is held constant,a decrease in the price level ________ planned aggregate expenditure and __________ short-run equilibrium output.

Correct AnswerverifiedShow Answer

In recent decades,the statistical inverse relationship between the inflation rate and the unemployment rate observed during the 1960s appears to have broken down.One explanation for this puzzle is provided by the

Correct AnswerverifiedShow Answer

The AD-AS model depicts a self-correcting economy.In the long run,the price level ___________ to eliminate a ___________ gap and ___________ to eliminate a(n) ____________ gap without help from government policies.

Correct AnswerverifiedShow Answer

In long-run equilibrium in the AD-AS model,which of the following is true?

Correct AnswerverifiedShow Answer

When the price level falls,planned aggregate expenditure increases along an AD curve because of the

Correct AnswerverifiedShow Answer

Correct Answer
verified

The SRAS is horizontal at a price level of 2. -According to the AD-AS model,the economy depicted above will achieve a long-run equilibrium state with a price level equal to _ and output equal to _.

Correct Answer
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Correct Answer
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According to the expectations-augmented Phillips curve model,a(n) _____ revision of the public's expectations of inflation will result in a(n) _ shift in the _______ Phillips curve.

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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The SRAS is horizontal at a price level of 3. -According to the AD-AS model,the economy depicted above has a short-run equilibrium output of _____ and a(n) _ gap equal to _______.

Correct Answer
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The SRAS is horizontal at a price level of 2. -According to the AD-AS model,the economy depicted above has a short-run equilibrium output of _____ and a(n) _ gap equal to _______.

Correct Answer
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Correct Answer
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Correct Answer
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The goal of monetary policy in Canada is to maintain inflation within a range of _,with the mean target rate of inflation of _.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

The AD-AS model predicts that a positive AD shock will cause the price level to _____,from the initial to a new long-run equilibrium level.But the model is silent about how fast the price level will _ from the initial to the new level;the model cannot explain _______.

Correct Answer
verified

If everything else is held constant,a decrease in the price level planned aggregate expenditure and __ short-run equilibrium output.

Correct Answer
verified

Correct Answer
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The AD-AS model depicts a self-correcting economy.In the long run,the price level _____ to eliminate a _ gap and _ to eliminate a(n) ______ gap without help from government policies.

Correct Answer
verified

Correct Answer
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Correct Answer
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