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


A) 20 percent
B) 40 percent
C) 60 percent
D) 80 percent

E) C) and D)
F) None of the above

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An aggregate-supply curve is described by the equation Y=80 + 0.5P. The expected price level is 100. How much is the long-run level of output?

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The standard form of a short-run aggrega...

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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.

E) A) and D)
F) All of the above

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Which statement best describes the beginning of a recession?


A) Production and unemployment both rise.
B) Production rises and unemployment falls.
C) Production falls and unemployment rises.
D) Production and unemployment both fall.

E) All of the above
F) A) and B)

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


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) All of the above
F) B) and C)

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How does real GDP change over time?


A) It moves in the same direction as unemployment.
B) It moves in the same direction as inflation.
C) It has a long-term upward trend.
D) It is approximately constant because it is measured in constant dollars.

E) A) and C)
F) A) and D)

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What would make the price level decrease and real GDP increase?


A) Long-run aggregate supply shifts right.
B) Long-run aggregate supply shifts left.
C) Aggregate demand shifts right.
D) Aggregate demand shifts left.

E) B) and C)
F) A) and C)

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What are the effects of a decrease in Canadian interest rates?


A) a depreciation of the dollar and greater net exports
B) a depreciation of the dollar and smaller net exports
C) an appreciation of the dollar and greater net exports
D) an appreciation of the dollar and smaller net exports

E) All of the above
F) B) and C)

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Which of the following adjusts to bring aggregate supply and demand into balance?


A) the price level
B) the real rate of interest
C) the money supply
D) immigration

E) A) and C)
F) None of the above

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Which statement best explains an increase in consumer spending?


A) People spend more when the price level rises because the dollars they hold are worth more.
B) People spend more when the price level rises because the dollars they hold are worth less.
C) People spend more when the price level falls because the dollars they hold are worth more.
D) People spend more when the price level falls because the dollars they hold are worth less.

E) A) and B)
F) A) and C)

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During Canada's three last recessions, investment spending accounted for what percentage of the decline in GDP?


A) 20 percent
B) 40 percent
C) 60 percent
D) 80 percent

E) None of the above
F) B) and D)

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An unexpected increase in the price level does not shift the aggregate-supply curve, but an expected increase in the price level shifts the aggregate-supply curve to the left.

A) True
B) False

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What is one explanation for the instability of oil prices?


A) inefficient production techniques that have made it unprofitable to develop oil
B) fluctuations in the inflation rate in major economies
C) pressure from environmental groups to reduce carbon emissions
D expansion in the market for Canadian oil due to new pipeline construction

D) A) and C)
E) None of the above

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Which term refers to a short period of falling incomes and rising unemployment?


A) depression
B) recession
C) stagflation
D) sticky wages

E) A) and B)
F) A) and C)

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In which situation are people most likely to spend more?


A) when stock prices and interest rates rise
B) when their real wealth rises and interest rates fall
C) when stock prices fall and interest rates rise
D) when their real wealth and interest rates fall

E) B) and D)
F) B) and C)

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How is the effect of a decrease in the price level represented?


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

E) C) and D)
F) B) and C)

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An economy is described by the aggregate-demand curve Y=70-P and the short-run the aggregate-supply curve Y=10+2P. a) If the economy is in long-run equilibrium, what are the long-run level of output, the actual, and the expected price level? b) Suppose consumers' confidence in the economy declines so that the aggregate demand declines by 10 percent. Calculate the new short-run equilibrium. What is the rate of change in output induced by the decline in confidence? What is the inflation rate? c) After a while, when some people observe the reduced economic activity and unemployment rises, they accept lower wages. Calculate the long-run output and price level.

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a) If the economy is in equilibrium, the...

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Scenario 14-2 The economy is in long-run equilibrium. Suddenly, due to corporate scandals, a recession experienced by a major trading partner, 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. How does the new long-run equilibrium differ from the original one?


A) Both the price level and real GDP are higher.
B) Both the price level and real GDP are lower.
C) The price level is the same and real GDP is lower.
D) The price level is lower and real GDP is the same.

E) A) and C)
F) A) and B)

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Figure 14-1 Figure 14-1 -Refer to Figure 14-1. If the economy is at C and there is an increase in aggregate demand, what happens to the economy in the short run? A) It stays at A. B) It moves to B. C) It moves to C. D) It moves to D. -Refer to Figure 14-1. If the economy is at C and there is an increase in aggregate demand, what happens to the economy in the short run?


A) It stays at A.
B) It moves to B.
C) It moves to C.
D) It moves to D.

E) C) and D)
F) A) and D)

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Suppose the economy is in long-run equilibrium. If there is a sharp increase in the minimum wage as well as an increase in pessimism about future business conditions, 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.

E) C) and D)
F) B) and C)

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