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ECON-1012-B-Introduction to Macroeconomics

ECON-1012-B-Introduction to Macroeconomics

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When the world economy goes into an expansion phase of the business cycle, what happens in the Canadian economy in the short run?

Real GDP decreases and the price level rises.

Real GDP decreases and the price level falls.

Real GDP doesn't change but the price level rises.

Real GDP increases and the price level rises.

Real GDP increases and the price level falls.

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Suppose the multiplier is 2.5 and initially real GDP equals potential GDP. If investment increases by $20 billion, how will equilibrium real GDP change in the long run?

It increases by more than $50 billion.

It does not change.

It decreases by less than $50 billion.

It increases by $50 billion.

It increases by a positive amount but less than $50 billion.

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Which of the following situations illustrates how monetary policy can influence aggregate demand?

The government reduces the goods and services tax. If household consumption expenditure increases, aggregate demand increases.

The Bank of Canada raises interest rates. If people plan to buy fewer consumer durables, aggregate demand decreases.

The expected future profit increases. If investors decide to save more, aggregate demand decreases.

Government increases its expenditure on goods and services. If private investment decreases, aggregate demand might not change.

The Canadian dollar exchange rate rises. If Canadian living near the U.S.-Canada border increase their imports of goods, aggregate demand decreases.

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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 four possible short-run macroeconomic equilibrium. In which of the graphs is the economy at a below full-employment equilibrium?

both graphs (c) and (d)

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How does an increase in investment influence the AE and AD curves?

The AE curve shifts upward by the ________, and the AD curve shifts rightward by the ________.

change in investment times the multiplier; change in investment times the multiplier

change in investment times the multiplier; change in investment

change in investment divided by the multiplier; change in investment

change in investment; change in investment

change in investment; change in investment times the multiplier

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If autoworkers agree to a cut in the nominal wage rate, which of the following events occurs?

This event ________ short-run aggregate supply and ________ long-run aggregate supply.

decreases; does not change;

does not change; does not change

increases; increases

decreases; does not change

increases; does not change;

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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 short-run effect of an increase in government expenditure?

both graphs (a) and (c)

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The quantity of real GDP demanded does not depend on which of the following decision-makers?

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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 a decrease in the quantity of money?

both graphs (b) and (d)

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The three columns of the table are titled Price level (2012 = 100), and real GDP demanded and real GDP supplied in trillions of 2012 dollars. The rows display the data as follows: 140; 4; 8130; 5; 7120; 6; 6110; 7; 5100; 8; 4

Refer to Table 10.3.2, which shows the aggregate demand and aggregate supply schedules. Potential GDP is $7 trillion. With no change in monetary policy and fiscal policy, which of the following events will occur in the long run?

Long-run aggregate supply curve will shift leftward.

Both A and C will occur.

Short-run aggregate supply curve will shift leftward.

Short-run aggregate supply curve will shift rightward.

Long-run aggregate supply curve will shift rightward.

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