Lec20 iC Questions Flashcards
Consider the IS-MP model. If the government of Canada increases government purchases and transfers to households without raising taxes, and the Bank of Canada acts to keep inflation equal to expected inflation, what will happen in the short-run?
a) GDP increases
b) Output gap increases
c) Real interest rates increase
d) Inflation increases
e) More than one of the above
c) Real interest rates increase
Consider the loanable funds model. If the government of Canada increases government purchases and transfers to households without raising taxes, and the Bank of Canada acts to keep inflation equal to expected inflation, what will happen in the long-run?
a) Investment decreases
b) Investment is unchanged
c) Investment increases
d) None of the above
a) Investment decreases
Due to higher interest rates
Consider the AD/AS model. If labour productivity increases, the effect on the economy will be:
a) Prices rise and GDP increases
b) Prices rise and GDP decreases
c) Prices fall and GDP increases
d) Prices fall and GDP decreases
e) None of the above
c) Prices fall and GDP increases
Consider the AD/AS model, starting in long-run equilibrium. If there is an increase in government spending, in the long run, this will cause:
a) Lower GDP
b) Higher GDP
c) Lower prices
d) Higher prices
e) None of the above
d) Higher prices
Consider the AD/AS model, starting in long-run equilibrium. If there is an increase in productivity, in the long run, this will cause:
a) Lower GDP
b) Higher GDP
c) Lower prices
d) Higher prices
e) None of the above
b) Higher GDP
c) Lower prices
Compare the IS-MP-PC model with the AD/AS model in the very short-run. If consumption increases in which model do prices increase in the very short-run?
a) IS-MP-PC model
b) AD/AS model
c) Neither model
d) Both models
e) None of the above
c) Neither model
Consider the AD/AS model. The “multiplier” defines how a change in spending translates into a change in output. How does the multiplier change with a change in the slope of the AS curve?
a) Larger when the AS curve is flat
b) Independent of the slope of the AS curve
c) Larger when the AS curve is steep
d) None of the above
a) Larger when the AS curve is flat
m = ΔGDP / ΔG
In a recession, the federal government might implement expansionary fiscal policy. Which of the following policies might this include?
a) Lower interest rates
b) Higher tax rates
c) Lower government spending
d) Higher transfers to households
e) None of the above
d) Higher transfers to households
Consider the AD/AS model. If households increase their savings rate, what is the effect in the short-run?
a) Lower GDP, lower prices
b) Lower GDP, higher prices
c) Higher GDP, lower prices
d) Higher GDP, higher prices
e) None of the above
a) Lower GDP, lower prices
Consider the AD/AS model. If households increase their savings rate, what is the effect in the long-run?
a) Lower GDP, lower prices
b) Lower GDP, higher prices
c) Higher GDP, lower prices
d) Higher GDP, higher prices
e) None of the above
b) Lower GDP, higher prices
c) Higher GDP, lower prices also works
Consider the loanable funds model and the Solow model. If households increase their savings rate, what is the effect in the very long-run?
a) Lower GDP
b) No change in GDP
c) Higher GDP
d) None of the above
c) Higher GDP
