Chapter 9: FIXED BLUR

Question 1 {1 point] Suppose the economy is initially in a Ion g-run macroeconomic equilibrium. it shocl: then hits the economy and we observe that the unemployment rate increases and the price level increases. We can conclude that _______ has decreased and there is now a{nl _______ gap. 0 Al aggregate supply: inflationary O B} aggregate demand: recessionary 0 Cl aggregate supply: recessionary O D} aggregate demand; inflationary Question 2 {1 point] Wthh oi the following are the defining assumptions of the short run in macroeco nomics? O M Factor prices are exogenous. and technology and factor supplies are changing. O B} Factor prices adjust to output gaps, and technology and factor prices are changing. 0 Cl Factor prices are exogenous. and technology and factor supplies are constant. 0 D} Factor prices are exogenous. technology and factor prices are endogenous. O E} Factor prices adjust to output gaps. and technology and factor supplies are constant. Question 3 {1 point] The economy starts in long-run equilibrium. After an initial shock. and the subsequent adjustment process. the economy ends up at a point at the initial price level and the initial level of real CDF'. Which of the following initial shocks would explain this? 0 a] The development of new government regulations that increase the cost of production. 0 h] fin appreciation of the Canadian dollar. 0 c] fin increase in exports. 0 d] an increase in desired savings. 0 el n increase in the net tax rate. Question 4 (1 point) Consider the AD/AS model. A permanent increase in productivity shifts both potential GDP and the aggregate supply curve to the right. If aggregate demand does not change, the result will be: O A) an increase in real GDP and a lower price level. B) a decrease in real GDP and an increase in the price level. O C) an increase in real GDP and no change in the price level. D) an increase in real GDP an an increase in the price level. O E) no change in real GDP and no change in the price level. Question 5 (1 point) An important assumption in the AD/AS macro model is that when real GDP exceeds potential output, factor prices rise and the O A) AD curve shifts to the right. O B) AS curve shifts to the left. O C) AS curve shifts to the right very rapidly. O D) AD curve shifts to the left rapidly. E) None of the above - the AS curve remains unchanged. Question 6 (1 point) All else equal, a recessionary output gap will lead to: O a) Falling wages and the aggregate demand curve shifting to the right. ( b) Falling wages and the aggregate demand curve shifting to the left. O c) Rising wages and the aggregate supply curve shifting to the right. O d) Falling wages and the aggregate supply curve shifting to the right. O e) Rising wages and the aggregate supply curve shifting to the left.Question 7 (1 point) Suppose Canada's economy is in a long-run equilibrium with real GDP equal to potential output. Now suppose there is an increase in world demand for Canada's goods. In the short run, _. In the long run, O A) real GDP rises and the price level falls; real GDP returns to its original level with a lower price level O B) real GDP and the price level both rise; real GDP returns to its original level with a higher price level O c) real GDP and the price level both fall; real GDP is below its original level with a lower price level O D) real GDP and the price level both rise; real GDP is above its original level with a higher price level O E) real GDP falls and the price level rises; real GDP is below its original level with a higher price level Question 8 (1 point) In the event of an inflationary gap, the automatic adjustment process would be for the .... ......; while a fiscal stabilization policy would cause the O a) AS curve to shift right ; AD curve to shift right. O b) AS curve to shift left ; AD curve to shift right. O c) AD curve to shift left ; AS curve to shift left. O d) AD curve to shift right ; AD curve to shift right. O e) AS curve to shift left ; AD curve to shift left. Question 9 (1 point) An event such as a global pandemic causes both aggregate demand and aggregate supply to fall leading to no change in prices, but a fall in real GDP. In the context of the AD/AS model, a decision to do nothing, as opposed to implementing expansionary fiscal policy, would cause: O a) Higher GDP in the long-run and lower prices. O b) A faster reduction in unemployment rates, but higher prices. O c) Lower GDP in the long-run and higher prices. O d) A slower reduction in unemployment rates, but lower prices.Question 10 (1 point) All else equal, an inflationary output gap will lead to: O a) Rising wages and the aggregate demand curve shifting to the left. O b) Falling wages and the aggregate supply curve shifting to the right. O c) Rising wages and the aggregate supply curve shifting to the left. O d) Falling wages and the aggregate demand curve shifting to the right. Oe) Rising wages and the aggregate supply curve shifting to the right. Question 11 (1 point) The economy starts in long-run equilibrium. After an initial shock, and the subsequent adjustment process, the economy ends up at a point with a higher price level and the initial level of real GDP. Which of the following initial shocks would explain this? O a) An increase in government transfer payments. O b) An improvement in production technology. O c) An increase in the marginal propensity to import. O d) An increase in desired savings. O e) An appreciation of the Canadian dollar. Question 12 (1 point) The economy starts in long-run equilibrium. A fiscal stabilization policy would respond to a depreciation of the Canadian dollar by: O a) Increasing interest rates. O b) Reducing government purchases. O c) Reducing net tax rates. O d) Increasing government transfer payments. O e) Reducing interest rates