Question 1

In the dynamic aggregate demand and aggregate supply model, what is the result of aggregate demand increasing slower than potential real GDP?

Accepted Answer

The answer of In the dynamic aggregate demand and aggregate...

Question 2

One factor which brought on the recession of 2008-2009 was the collapse of the U.S.housing bubble.

Accepted Answer

The collapse of the U.S. housing bubble, along with other economic factors, such as subprime lending, played a significant role in causing the recession of 2008-2009.

Question 3

During 2008-2009, falling oil prices

Accepted Answer

Falling oil prices would result in a decrease in production costs for Canadian firms, which would shift the short-run aggregate supply curve to the right. However, it is unlikely that this effect would be large enough to offset the negative impact on Canadian aggregate demand from reduced oil revenue and lower investment in the oil sector. Therefore, falling oil prices would lead to a leftward shift in the Canadian aggregate demand curve.

Question 4

Which of the following is an assumption of the dynamic aggregate demand - aggregate supply model?

Accepted Answer

The dynamic aggregate demand and aggregate supply model assumes that aggregate demand and short-run aggregate supply typically increase over time, reflecting economic growth and inflation. This is why they are often depicted as shifting to the right in most years.

Question 5

Figure 9.8  Alt text for Figure 9.8: In figure 9.8, a graph comparing real GDP and price level.
Long description for Figure 9.8: The x-axis is labelled, real GDP (trillions of dollars), with values 1.60, 1.64, 1.65 marked.The y-axis is labelled, price level (CPI), with values 125 and 127 marked.6 lines are shown; SRAS1, SRAS2, AD1, AD2, LRAS1, LRAS2.Line SRAS1 begins in the bottom left corner and slopes up to the top right corner.Line SRAS2 follows the same slope as line SRAS1, but is plotted to the right.The area between lines SRAS1 and SRAS2 is indicated by a right pointing arrow.Line AD1 begins at the top left corner and slopes down to the bottom center.Line AD2 follows the same slope as line AD1, but is plotted to the right.The area between lines AD1 and AD2 is indicated by a right pointing arrow.Line LRAS1 is perpendicular to the x-axis, and begins from the value 1.60.Line LRAS2 is perpendicular to the x-axis, and begins from the value 1.65.The area between lines LRAS1 and LRAS2 is indicated by a right pointing arrow.Line LRAS1 intersects lines AD1 and SRAS1 at point A (1.60, 125).Lines AD2 and SRAS2 intersect at point B (1.64, 127).Points A and B are connected to their respective coordinates on the x-axis and y-axis with dotted lines.Line LRAS2 intersects lines SRAS1 and SRAS2 near the right end of these lines.Similarly, line LRAS2 intersects lines AD1 and AD2 near the right end of these lines.
-Refer to Figure 9.8.Given the economy is at point A in year 1, the unemployment rate will ________ and the price level will ________ in year 2.

Accepted Answer

The economy is at point A, which is below the natural rate of unemployment and above the natural rate of output. In year 2, the economy will move towards the natural rate of unemployment and output, which means that the unemployment rate will rise and the price level will fall.

Question 6

In the dynamic aggregate demand and aggregate supply model, inflation occurs if

Accepted Answer

Inflation occurs when the aggregate demand (AD) increases or shifts to the right faster than the short-run aggregate supply (SRAS), leading to higher prices for the same level of goods and services.

Question 7

The dynamic aggregate demand and aggregate supply model assumes that potential GDP is constant across time.

Accepted Answer

The dynamic aggregate demand and aggregate supply model allows for changes in potential GDP over time, as it considers factors such as technological progress and changes in the labor force.

Question 8

Inflation is generally the result of total spending growing faster than total production.

Accepted Answer

Inflation occurs when there is an increase in the prices of goods and services, which can happen when there is too much money chasing too few goods. This scenario can occur when total spending in an economy grows at a faster rate than the total production of goods and services.

Question 9

Explain how the static aggregate demand and aggregate supply model gives us misleading results about the price level, particularly with respect to decreases in aggregate demand.Describe how the aggregate demand curve is different in the dynamic model as compared to the static model.Describe how potential GDP is different in the dynamic model as compared to the static model.

Accepted Answer

The answer of Explain how the static aggregate demand and...

Question 10

The dynamic aggregate demand and aggregate supply model assumes that potential GDP increases over time.

Accepted Answer

The dynamic aggregate demand and aggregate supply model assumes that potential GDP increases over time due to factors such as technological advancements, population growth, and capital accumulation leading to an increase in the long-run aggregate supply curve.

Question 11

In Canada, because shipping plays such an important role in the economy, declines in cargo volumes reflect

Accepted Answer

Since declines in cargo volumes reflect a decrease in the amount of goods being shipped, this would result in a decrease in demand for goods and services, which would lead to a decline in aggregate demand.

Question 12

Which of the following could explain why there is an increase in potential GDP but the equilibrium level of GDP falls?

Accepted Answer

If the Aggregate Demand (AD) does not shift and the Short-Run Aggregate Supply (SRAS) shifts to the left, it can lead to a decrease in the equilibrium level of GDP despite an increase in potential GDP. This is because the leftward shift in SRAS can cause a higher price level and lower output in the short run.

Question 13

Which of the following is one reason for the decline in aggregate demand that led to the recession of 2008-2009?

Accepted Answer

The answer of Which of the following is one reason...

Question 14

Which of the following was not a cause the Canadian recession of 2008-2009?

Accepted Answer

While the Canadian housing market experienced a slowdown, it did not completely collapse and was not a primary cause of the recession. The other options listed were factors contributing to the recession.

Question 15

Explain how the aggregate demand and aggregate supply model can be made more dynamic.

Accepted Answer

The answer of Explain how the aggregate demand and aggregate...

Question 16

Figure 9.8 Alt text for Figure 9.8: In figure 9.8, a graph comparing real GDP and price level. Long description for Figure 9.8: The x-axis is labelled, real GDP (trillions of dollars), with values 1.60, 1.64, 1.65 marked.The y-axis is labelled, price level (CPI), with values 125 and 127 marked.6 lines are shown; SRAS1, SRAS2, AD1, AD2, LRAS1, LRAS2.Line SRAS1 begins in the bottom left corner and slopes up to the top right corner.Line SRAS2 follows the same slope as line SRAS1, but is plotted to the right.The area between lines SRAS1 and SRAS2 is indicated by a right pointing arrow.Line AD1 begins at the top left corner and slopes down to the bottom center.Line AD2 follows the same slope as line AD1, but is plotted to the right.The area between lines AD1 and AD2 is indicated by a right pointing arrow.Line LRAS1 is perpendicular to the x-axis, and begins from the value 1.60.Line LRAS2 is perpendicular to the x-axis, and begins from the value 1.65.The area between lines LRAS1 and LRAS2 is indicated by a right pointing arrow.Line LRAS1 intersects lines AD1 and SRAS1 at point A (1.60, 125).Lines AD2 and SRAS2 intersect at point B (1.64, 127).Points A and B are connected to their respective coordinates on the x-axis and y-axis with dotted lines.Line LRAS2 intersects lines SRAS1 and SRAS2 near the right end of these lines.Similarly, line LRAS2 intersects lines AD1 and AD2 near the right end of these lines. -Refer to Figure 9.8.In the figure above, AD₁, LRAS₁, and SRAS₁ denote AD, LRAS ,and SRAS in year 1, while AD₂, LRAS₂, and SRAS₂ denote AD, LRAS, and SRAS in year 2.Given the economy is at point A in year 1, what is the actual growth rate in GDP in year 2?

Accepted Answer

The actual growth rate in GDP in year 2 can be determined by the shift from the initial equilibrium point (A) in year 1 to a new equilibrium point in year 2. Without seeing the figure, the correct answer cannot be directly determined. However, assuming the question implies that the economy has moved to a point that reflects a 2.5% growth (as might be suggested by the specific options given and the context of typical economic growth rates), option B would be the most logical choice. Economic growth rates are usually expressed in annual percentage terms and reflect the increase in the value of all goods and services produced by an economy.

Question 17

Economists and industry analysts pay close attention to the volume of rail cargo shipments because changes in rail shipments have historically been good indicators of

Accepted Answer

Changes in rail shipments have historically been good indicators of future economic activity, as rail cargo is closely tied to the movement of goods and materials used in production and consumption.

Question 18

Figure 9.8  Alt text for Figure 9.8: In figure 9.8, a graph comparing real GDP and price level.
Long description for Figure 9.8: The x-axis is labelled, real GDP (trillions of dollars), with values 1.60, 1.64, 1.65 marked.The y-axis is labelled, price level (CPI), with values 125 and 127 marked.6 lines are shown; SRAS1, SRAS2, AD1, AD2, LRAS1, LRAS2.Line SRAS1 begins in the bottom left corner and slopes up to the top right corner.Line SRAS2 follows the same slope as line SRAS1, but is plotted to the right.The area between lines SRAS1 and SRAS2 is indicated by a right pointing arrow.Line AD1 begins at the top left corner and slopes down to the bottom center.Line AD2 follows the same slope as line AD1, but is plotted to the right.The area between lines AD1 and AD2 is indicated by a right pointing arrow.Line LRAS1 is perpendicular to the x-axis, and begins from the value 1.60.Line LRAS2 is perpendicular to the x-axis, and begins from the value 1.65.The area between lines LRAS1 and LRAS2 is indicated by a right pointing arrow.Line LRAS1 intersects lines AD1 and SRAS1 at point A (1.60, 125).Lines AD2 and SRAS2 intersect at point B (1.64, 127).Points A and B are connected to their respective coordinates on the x-axis and y-axis with dotted lines.Line LRAS2 intersects lines SRAS1 and SRAS2 near the right end of these lines.Similarly, line LRAS2 intersects lines AD1 and AD2 near the right end of these lines.
-Refer to Figure 9.8.Given the economy is at point A in year 1, what is the difference between the actual growth rate in GDP in year 2 and the potential growth rate in GDP in year 2?

Accepted Answer

The difference between the actual growth rate and the potential growth rate is calculated by subtracting the potential growth rate from the actual growth rate. Based on the information provided, this difference is 0.625%.

Question 19

When people become ________ concerned with the underlying value of their assets and became ________ concerned with the expectations that the prices of their houses would continue increasing, a housing bubble occurred.

Accepted Answer

When people become less concerned with the underlying value of their assets, they may start to focus more on short-term gains and speculation, leading to unrealistic expectations that prices will continue to rise. This can create a housing bubble, where prices are driven up beyond what the market can ultimately support. However, if people remain focused on the underlying value of their assets and make decisions based on long-term economic fundamentals, this is less likely to occur.

Question 20

Use the dynamic model of aggregate demand and supply to illustrate a situation where the economy is growing but experiencing inflation in the long run.

Accepted Answer

The answer of Use the dynamic model of aggregate demand...

Quiz 9: Aggregate Demand and Aggregate Supply Analysis