Chapter 23

Question 1

Which of these factors will cause the aggregate demand curve to shift?

A change in costs of production
A change in the price level
A change in productivity
A change in the expectations of households and firms

Answer 1

A change in the expectations of households and firms

Question 2

Stagflation occurs when:

Answer 2

the economy has simultaneous high inflation and declining output as shown in this graph. Supply shocks, like a large unexpected increase in the price of oil, can cause stagflation.

Question 3

The 1973-1974 recession was a result of a:

Answer 3

supply shock that caused a leftward shift of the short-run aggregate supply curve

Question 4

From 2002 to partway through 2008, strong economic growth in the world economy led to an increase in demand for Canadian-produced raw materials. This type of aggregate demand shock would shift Canada’s AE function __________ and would shift Canada’s AD curve to the __________.

Answer 4

upward; right

Question 5

A change in autonomous expenditure changes equilibrium GDP for any given price level. The simple multiplier measures the resulting:

Answer 5

horizontal shift in the AD curve

Question 6

Stagflation is a:

Answer 6

combination of inflation and high unemployment

Question 7

A variable price level __ the simple multipler

Answer 7

reduces

Question 8

Deterioration in technology causes the AS curve to move [upward] or [downward] and [right] or [left]?

Answer 8

upward and left

Question 9

The aggregate demand curve shows the relationship between:

Answer 9

the price level and the quantity of real GDP demanded

Question 10

One of the reasons the AD curve is negatively sloped is because:

Answer 10

a fall in the price level (for a given exchange rate) leads to a rise in net exports and leads to an increase in equilibrium GDP

Question 11

Consider a country that does not produce and export oil. In the short run, a supply shock as a result of an unexpected decrease in oil prices will:

Answer 11

decrease the price level but increase real GDP

Question 12

For a country that uses oil as an input, an unexpected change in the price of oil would be called __________ by economists (assume the country does not produce and export oil).

Question 12

For a country that uses oil as an input, an unexpected change in the price of oil would be called __________ by economists (assume the country does not produce and export oil).

Answer 12

a supply shock

Question 13

In Canada, a decrease in the world price of oil is a:

Question 14

In Canada, a decrease in the world price of oil is a:

Answer 14

negative aggregate demand shock.