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ECON-1012-B-Introduction to Macroeconomics

ECON-1012-B-Introduction to Macroeconomics

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Short Description: A set of four graph of price level versus real G D P. Long Description: The vertical axis of each graph is labelled, price level and the horizontal axis is labelled, real G D P. The graph are as follows.(a) The line for S A S0 slopes upward from the lower left corner to the upper right corner. The line for S A S1 slopes upward from the lower left corner to the upper right corner parallel to the line for S A S0 on the bottom. The line for A D0 slopes downward from the upper left corner to the lower right corner, intersecting the lines for S A S0 and S A S1.(b) The line for S A S0 slopes upward from the lower left corner to the upper right corner. The line for S A S1 slopes upward from the lower left corner to the upper right corner parallel to the line for S A S0 on the top. The line for A D0 slopes downward from the upper left corner to the lower right corner, intersecting the lines for S A S0 and S A S1.(c) The line for A D0 slopes down from the upper left corner to the lower right corner. The line for A D1 slopes downward from the upper left corner to the lower right corner parallel to the line for A D0 on the right. The line for S A S0 slopes upward from the lower left corner to the upper right corner, intersecting the lines for A D0 and A D1.(d) The line for A D0 slopes down from the upper left corner to the lower right corner. The line for A D1 slopes downward from the upper left corner to the lower right corner parallel to the line for A D0 on the right. The line for S A S0 slopes upward from the lower left corner to the upper right corner, intersecting the lines for A D0 and A D1.

Refer to Figure 10.2.1, which shows possible changes in aggregate supply and aggregate demand. Which graph illustrates the effect of an increase in expected future income?

both graphs (a) and (c)

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Short Description: A set of four graph of price level versus real G D P. Long Description: The vertical axis of each graph is labelled, price level and the horizontal axis is labelled, real G D P. The graph are as follows.(a) The line for S A S slopes upward from the lower left corner to the upper right corner. The line for A D slopes downward from the upper left corner to the lower right corner, intersecting the lines for S A S. The line for L A S is a vertical line from a point on the horizontal axis. The line intersect the lines for S A S and A D right to their point of intersection.(b) The line for S A S slopes upward from the lower left corner to the upper right corner. The line for A D slopes downward from the upper left corner to the lower right corner, intersecting the lines for S A S. The line for L A S is a vertical line from a point on the horizontal axis. The line intersect the lines for S A S and A D at their point of intersection. (c) The line for S A S slopes upward from the lower left corner to the upper right corner. The line for A D slopes downward from the upper left corner to the lower right corner, intersecting the lines for S A S. The line for L A S is a vertical line from a point on the horizontal axis. The line intersect the lines for S A S and A D left to their point of intersection.(d) The line for S A S slopes upward from the lower left corner to the upper right corner. The line for A D slopes downward from the upper left corner to the lower right corner, intersecting the lines for S A S. The line for L A S is a vertical line from a point on the horizontal axis. The line intersect the lines for S A S and A D left to their point of intersection.

Refer to Figure 10.3.3, which shows the AS-AD model in which an economy is in the short-run macroeconomic equilibrium in graph (b). How would you expect the government to respond to its current macroeconomic equilibrium?

Pursue trade policies that reduce exports.

Increase government expenditure.

Cut government expenditure.

Do nothing except maintain the current equilibrium.

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Short Description: A graph of price level versus real G D P. Long Description: The vertical axis is labelled, price level (G D P deflator, 20 12 = 100) and ranges from 60 to 110 in increments of 10 with a kink near the origin. The horizontal axis is labelled, real G D P (billions of 20 12 dollars) and ranges from 320 to 520 in increments of 40 with a kink near the origin. The line for S A S slopes upward from the lower left corner to the upper right corner passing through the points (340, 70) and (400, 85). The line for A D slopes downward from the upper left corner to the lower right corner, passing through the points (360, 100), (400, 85), and (440, 70). The line for L A S is a vertical line from the point (440, 0) on the horizontal axis passing through the point (440, 70).

Refer to Figure 10.3.1, which shows the AS-AD model. What is short-run macroeconomic equilibrium real GDP?

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Which of the following statements about potential GDP is correct?

Potential GDP increases as the price level rises.

Potential GDP does not vary with the price level.

Potential GDP increases as the quantity of money in the economy increases.

Potential GDP is the level of real GDP when unemployment is zero.

Potential GDP never changes.

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A decrease in the overnight rate target has which of the following outcomes?

decreases the demand for loanable funds, raises the real interest rate, and decreases aggregate demand

increases the supply of loanable funds, lowers the real interest rate, and increases aggregate demand

increases other short-term interest rates, decreases investment, and decreases aggregate demand

lowers other short-term interest rates, raises the real interest rate, and increases aggregate demand

increases the demand for loanable funds, lowers the real interest rate, and increases aggregate demand

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How is the overnight rate determined in the market for reserves in a floor system?

In a floor system, the Bank of Canada uses ________ to keep the overnight rate ________ of the operating band.

quantitative tightening; at the top

quantitative easing; at the bottom

open market operations; at the centre

open market operations; inside

quantitative easing; at the centre

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Why does the Bank of Canada pay close attention to the core inflation measures in addition to the overall CPI inflation rate?

The core inflation measures include eight volatile prices and are therefore more likely to stay within the target band.

The core inflation measures include taxes, while the overall CPI rate does not.

The core inflation measures are more volatile and therefore a better predictor of trend inflation.

The core inflation measures have a lower average value and therefore makes the Bank look better.

The core inflation measures provide a better view of the underlying inflation trend and better predict future CPI inflation.

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What action does the Bank of Canada take to avoid a recession?

The Bank of Canada ________ the overnight rate target, which ________ the quantity of money and ________ the interest rate.

lowers; decreases; lowers

raises; increases; lowers

raises; decreases; raises

lowers; increases; raises

lowers; increases; lowers

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When the Bank of Canada lowers the overnight rate target, how does the real GDP growth rate change?

It slows one year later.

It does not change, but inflation falls.

It speeds up two years later.

It speeds up one year later.

It does not change, but inflation rises.

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If the Bank of Canada lowers the overnight loans rate, how do the exchange rate and net exports change?

The exchange rate ________, and net exports ________.

rises; increase

falls; do not change

falls; increase

rises; decrease

falls; decrease

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