Chapter 8 MCQ Flashcards
In economics, the long run is
A.
a period of time long enough for the economy to be at potential GDP.
B.
a period of time when some input prices do not change.
C.
more than 12 months.
D.
all of the above.
A.
The long run is a period of time long enough for all prices to adjust to equilibrium prices; the economy is at potential GDP.
The full-employment output of an economy can be modelled as
A.
a long -run aggregate supply curve.
B.
a long-run aggregate demand curve.
C.
a short-run aggregate supply curve.
D.
negative supply shocks.
A.
The full-employment output of an economy can be modelled as
- points on a production possibilities frontier (PPF).
- long-run aggregate supply or potential GDP long dashthe quantity of real GDP supplied when all inputs are fully employed.
- long-run aggregate supply curve (LAS) long dashvertical line at potential GDP; quantity of potential GDP does not change when the price level changes.
There will be a shift in aggregate supply
A.
if there is an increase in inputs.
B.
if the price level rises.
C.
if the price level falls.
D.
All of the choices above are correct.
A.
-Short-run aggregate supply - quantity of real GDP macroeconomic players plan to supply at different price levels.
-Law of short-run aggregate supply - as the price level rises, aggregate quantity supplied of real GDP increases.
-Changes in the quantity or quality of inputs shift both the long-run aggregate supply curve (LAS) and short-run aggregate supply curve (SAS) in the same direction.
-Both aggregate supply curves shift rightward for increase in inputs, leftward for decrease in inputs.
In the short run, the aggregate quantity supplied of real GDP
A.
decreases when the price level rises.
B.
increases when there is a positive supply shock.
C.
increases when the price level rises.
D.
decreases when there is a negative supply shock.
C.
In the short run, the aggregate quantity supplied of real GDP increases when the price level rises and decreases when the price level falls.
According to the law of short-run aggregate supply,
A.
lower prices create incentives for increased production through higher profits.
B.
higher prices stimulate fewer consumer purchases.
C.
higher prices create incentives for increased production through higher profits.
D.
higher prices create incentives for decreased production since consumers prefer lower prices.
C.
The law of short-run aggregate supply states the following: as the price level rises, the aggregate quantity supplied increases. Higher prices create incentives for increased production because of higher profits and cover higher marginal opportunity costs of production.
In the short run, aggregate supply
A.
decreases when there is a negative supply shock.
B.
increases when the price level rises.
C.
increases when there is a negative supply shock.
D.
decreases when the price level falls.
A.
In the short run, aggregate supply decreases when there is a negative supply shock and increases when there is a positive supply shock.
There will be changes in aggregate demand if
A.
there is a change in input prices.
B.
technology changes.
C.
taxes change.
D.
All of the choices above are correct.
C.
The aggregate quanitity demanded of real GDP increases if the price level falls, and decreases if the price level rises. There will be an increase in aggregate demand (a positive demand shock) when there are lower interest rates, more optimistic consumers, more government spending, and a higher value of the Canadian dollar.
Aggregate demand for real GDP
A.
decreases when the price level rises.
B.
decreases when there is a negative demand shock.
C.
increases when the price level falls.
D.
increases when there is a negative demand shock.
B.
Aggregate demand for real GDP decreases when there is a negative demand shock and increases when there is a positive demand shock.
Planned spending on aggregate demand is the sum of planned
A.
C + I - G + X + IM.
B.
C + I + G + X - IM.
C.
C - I + G + X - IM.
D.
C + IM + G + I - X.
B.
Planned spending on aggregate demand is the sum of planned consumer spending (C), planned business investment spending (I), planned government purchases of products and services (G), and planned net exports (X - IM).
Aggregate demand decreases if
A.
government increases taxes.
B.
transfer payments increase.
C.
business investors become more optimistic.
D.
the CPI increases.
a.
Tax cuts are positive demand shocks, increasing aggregate demand. Similarly, tax increases are negative demand shocks that decrease aggregate demand.
The aggregate quantity demanded of real GDP
A.
does not change with prices.
B.
increases if the price level falls.
C.
decreases if the price level falls.
D.
All of the choices above are correct.
b.
Suppose the economy is in long-run equilbrium and there is a decrease in aggregate demand. Which of the following statements is true?
A.
The equilibrium price level will rise, and equilibrium GDP will increase.
B.
The equilibrium price level will fall, and equilibrium GDP will be unchanged.
C.
The equilibrium price level will fall, and equilibrium GDP will increase.
D.
The equilibrium price level will rise, and equilibrium GDP will be unchanged.
B.
Suppose the economy is in long-run equilbrium and there is an increase in aggregate demand. Which of the following statements is true?
A.
The equilibrium price level will fall, and equilibrium GDP will be unchanged.
B.
The equilibrium price level will rise, and equilibrium GDP will decrease.
C.
The equilibrium price level will rise, and equilibrium GDP will be unchanged.
Your answer is correct.D.
The equilibrium price level will fall, and equilibrium GDP will decrease.
C.
When there is an increase in aggregate demand and long-run aggregate supply is vertical, the equilibrium price level will rise and equilibrium GDP will be unchanged.
For the “No, markets fail often” camp, when a negative demand shock occurs,
A.
lower interest rates will increase investment.
B.
workers and employers accept layoffs instead of lower wages.
C.
falling Canadian prices decrease net exports.
D.
falling prices will increase consumer demand for products and services.
B.
According to the law of short-run aggregate supply,
A.
higher prices create incentives for decreased production since consumers prefer lower prices.
B.
higher prices stimulate fewer consumer purchases.
C.
lower prices create incentives for increased production through higher profits.
D.
higher prices create incentives for increased production through higher profits.
D.
