Question 1

An increase in the price of imported oil leads to a _____ shock.

Accepted Answer

An increase in the price of imported oil would cause a decrease in the supply of goods and services due to higher production costs, leading to a negative supply shock.

Question 2

Stagflation may result from a(n):

Accepted Answer

Stagflation is a situation where there is a combination of stagnant economic growth and high inflation. An increase in the price of oil can lead to an increase in the cost of production for businesses, which can result in higher prices for goods and services. This can cause inflation to rise, while at the same time, the increase in production costs can lead to businesses producing less, resulting in stagnant economic growth. Therefore, an increase in the price of oil can lead to stagflation.

Question 3

Suppose the equilibrium aggregate price level and the equilibrium level of real GDP are both rising.This is probably the effect of a(n)_____ in aggregate _____.

Accepted Answer

When the equilibrium aggregate price level and equilibrium level of real GDP are both rising, it indicates an increase in both demand and supply. However, since the question only asks for one option, the correct choice is an increase in aggregate demand.

Question 4

Stagflation is usually caused by a _____ shock.

Accepted Answer

Stagflation is characterized by high inflation and stagnant economic growth. This typically occurs due to a negative supply shock, such as an increase in the price of oil or a decrease in the availability of key inputs for production. As a result, prices of goods and services rise, but the economy does not grow, leading to high inflation and stagnant growth, which is a unique and challenging economic situation.

Question 5

Suppose that the Canadian government doubles its spending on health care.The _____ curve shifts _____,output _____,and prices _____.

Accepted Answer

When the government increases its spending, it boosts aggregate demand, shifting the aggregate demand curve to the right. This leads to an increase in output and prices.

Question 6

Suppose the economy is operating in long-run equilibrium and a positive demand shock hits.We expect a short-run increase in real GDP and the price level and a long-run _____ in real GDP and _____ in the price level.

Accepted Answer

In the long run, the economy returns to its potential output, so real GDP decreases back to its original level. However, the price level remains higher due to the initial demand shock, leading to an increase in the price level.

Question 7

In the short run,the equilibrium price level and the equilibrium level of total output are determined by the intersection of:

Accepted Answer

In the short run, the equilibrium price level and the equilibrium level of total output are determined by the intersection of the short-run aggregate supply (SRAS) and aggregate demand. This intersection point determines the price level and output level that balances the supply and demand in the economy in the short run. The long-run aggregate supply (LRAS) and potential output can affect the economy in the long run but do not determine the short-run equilibrium price level and output level.

Question 8

Unexpectedly rising commodity prices lead to a _____ shock.

Accepted Answer

Unexpectedly rising commodity prices lead to a negative supply shock. This is because as commodity prices rise unexpectedly, suppliers may not be able to increase production quickly enough to meet the rising demand. This can lead to a shortage of the commodity, higher prices, and decreased economic activity overall.

Question 9

If membership in labour unions falls,production costs will:

Accepted Answer

If membership in labor unions falls, it typically leads to lower wage demands, reducing production costs. This can cause the short-run aggregate supply (SRAS) to shift to the right, increasing equilibrium GDP and lowering the aggregate price level.

Question 10

An improvement in the business outlook of firms is a type of positive _____ shock and therefore shifts the _____ curve to the _____.

Accepted Answer

The answer of An improvement in the business outlook of...

Question 11

Use the following to answer question : 
-(Figure: Macroeconomics Equilibrium)Refer to Figure: Macroeconomics Equilibrium.Curve 1 refers to _____,curve 2 refers to _____,and curve 3 refers to _____.

Accepted Answer

The answer of Use the following to answer question :...

Question 12

An economic policy maker would rank a _____ shock as the LEAST preferred type.

Accepted Answer

A negative supply shock refers to a sudden decrease in the supply of goods or services, which can lead to a decrease in employment, output, and an increase in prices. This is the least preferred type of shock as it can have a significant negative impact on the economy, causing hardship for individuals and businesses. A positive demand shock, for example, would be preferable as it would increase output and employment opportunities.

Question 13

A decrease in aggregate demand will generate _____ in real GDP and _____ in the price level in the short run.

Accepted Answer

A decrease in aggregate demand leads to a decrease in real GDP as businesses produce less in response to lower demand. It also leads to a decrease in the price level (deflation) as businesses lower prices in an attempt to attract more customers.

Question 14

An increase in investment spending leads to _____ in the price level and _____ in real GDP in the short run.

Accepted Answer

An increase in investment spending leads to an increase in aggregate demand in the short run, which in turn leads to an increase in both the price level and real GDP. Therefore, option D is the correct answer.

Question 15

Suppose the equilibrium aggregate price level is rising and the equilibrium level of real GDP is falling.Which factor MOST likely caused these changes?

Accepted Answer

A decrease in short-run aggregate supply would lead to higher prices due to the reduced supply of goods and services, while also potentially causing a decrease in real GDP as the economy is unable to produce as much. This scenario aligns with the described conditions of rising prices and falling real GDP.

Question 16

An economic policy maker would rank a _____ shock as the MOST preferred type.

Accepted Answer

A positive supply shock increases the productive capacity of the economy, leading to lower prices and higher output. This type of shock is generally preferred by policy makers as it leads to long-term economic growth and stability. Positive demand shocks, while also beneficial in the short term, can lead to inflation and other negative economic consequences. Negative supply and demand shocks are generally seen as undesirable as they can lead to economic contraction and instability.

Question 17

A negative short-run supply shock _____ aggregate output and _____ the aggregate price level.

Accepted Answer

A negative short-run supply shock reduces aggregate output because it decreases the total amount of goods and services produced. It increases the aggregate price level due to the reduced supply, which leads to higher prices.

Question 18

An increase in aggregate demand will generate _____ in real GDP and _____ in the price level in the short run.

Accepted Answer

An increase in aggregate demand means that there is more demand for goods and services in an economy. In the short run, firms may respond to this increase in demand by increasing production, hiring more workers, and using more resources. This will lead to an increase in real GDP. However, if the increase in demand is greater than the increase in supply, firms may also respond by raising prices to ration their limited resources. This will lead to an increase in the price level. Therefore, an increase in aggregate demand will generate an increase in both real GDP and the price level in the short run.

Question 19

A natural disaster that destroys part of a country's infrastructure is a type of negative _____ shock and therefore shifts the _____ curve to the _____.

Accepted Answer

A natural disaster that destroys part of a country's infrastructure is a supply shock as it affects the ability of firms to produce goods and services. This leads to a shift in the short-run aggregate supply curve to the left. The demand curve is not directly affected by a supply shock. The long-run aggregate supply curve is not affected in the short run.

Question 20

Suppose that political instability in the Middle East interrupts the supply of oil.The _____ curve shifts _____,output _____,and prices _____.

Accepted Answer

An interruption in the supply of oil would shift the short-run aggregate supply curve to the left, reducing output and increasing prices. This is because the cost of production would increase with higher oil prices, leading to a lower level of real output in the economy. The correct answer is thus B.

Quiz 12: Aggregate Demand and Aggregate Supply

An increase in the price of imported oil leads to a _____ shock.

Stagflation may result from a(n) :

Suppose the equilibrium aggregate price level and the equilibrium level of real GDP are both rising.This is probably the effect of a(n) _ in aggregate _.

Stagflation is usually caused by a _____ shock.

Suppose that the Canadian government doubles its spending on health care.The ___ curve shifts _,output _,and prices ___.

Suppose the economy is operating in long-run equilibrium and a positive demand shock hits.We expect a short-run increase in real GDP and the price level and a long-run _ in real GDP and _ in the price level.

In the short run,the equilibrium price level and the equilibrium level of total output are determined by the intersection of:

Unexpectedly rising commodity prices lead to a _____ shock.

If membership in labour unions falls,production costs will:

An improvement in the business outlook of firms is a type of positive ___ shock and therefore shifts the _ curve to the ___.

Use the following to answer question : -(Figure: Macroeconomics Equilibrium) Refer to Figure: Macroeconomics Equilibrium.Curve 1 refers to ___,curve 2 refers to _,and curve 3 refers to ___.

An economic policy maker would rank a _____ shock as the LEAST preferred type.

A decrease in aggregate demand will generate _ in real GDP and _ in the price level in the short run.

An increase in investment spending leads to _ in the price level and _ in real GDP in the short run.

Suppose the equilibrium aggregate price level is rising and the equilibrium level of real GDP is falling.Which factor MOST likely caused these changes?

An economic policy maker would rank a _____ shock as the MOST preferred type.

A negative short-run supply shock _ aggregate output and _ the aggregate price level.

An increase in aggregate demand will generate _ in real GDP and _ in the price level in the short run.

A natural disaster that destroys part of a country's infrastructure is a type of negative ___ shock and therefore shifts the _ curve to the ___.

Suppose that political instability in the Middle East interrupts the supply of oil.The ___ curve shifts _,output _,and prices ___.

Quiz 12: Aggregate Demand and Aggregate Supply

An increase in the price of imported oil leads to a _____ shock.

Stagflation may result from a(n) :

Suppose the equilibrium aggregate price level and the equilibrium level of real GDP are both rising.This is probably the effect of a(n) _____ in aggregate _____.

Stagflation is usually caused by a _____ shock.

Suppose that the Canadian government doubles its spending on health care.The _____ curve shifts _____,output _____,and prices _____.

Suppose the economy is operating in long-run equilibrium and a positive demand shock hits.We expect a short-run increase in real GDP and the price level and a long-run _____ in real GDP and _____ in the price level.

In the short run,the equilibrium price level and the equilibrium level of total output are determined by the intersection of:

Unexpectedly rising commodity prices lead to a _____ shock.

If membership in labour unions falls,production costs will:

An improvement in the business outlook of firms is a type of positive _____ shock and therefore shifts the _____ curve to the _____.

Use the following to answer question : -(Figure: Macroeconomics Equilibrium) Refer to Figure: Macroeconomics Equilibrium.Curve 1 refers to _____,curve 2 refers to _____,and curve 3 refers to _____.

An economic policy maker would rank a _____ shock as the LEAST preferred type.

A decrease in aggregate demand will generate _____ in real GDP and _____ in the price level in the short run.

An increase in investment spending leads to _____ in the price level and _____ in real GDP in the short run.

Suppose the equilibrium aggregate price level is rising and the equilibrium level of real GDP is falling.Which factor MOST likely caused these changes?

An economic policy maker would rank a _____ shock as the MOST preferred type.

A negative short-run supply shock _____ aggregate output and _____ the aggregate price level.

An increase in aggregate demand will generate _____ in real GDP and _____ in the price level in the short run.

A natural disaster that destroys part of a country's infrastructure is a type of negative _____ shock and therefore shifts the _____ curve to the _____.

Suppose that political instability in the Middle East interrupts the supply of oil.The _____ curve shifts _____,output _____,and prices _____.

Suppose the equilibrium aggregate price level and the equilibrium level of real GDP are both rising.This is probably the effect of a(n) _ in aggregate _.

Suppose that the Canadian government doubles its spending on health care.The ___ curve shifts _,output _,and prices ___.

Suppose the economy is operating in long-run equilibrium and a positive demand shock hits.We expect a short-run increase in real GDP and the price level and a long-run _ in real GDP and _ in the price level.

An improvement in the business outlook of firms is a type of positive ___ shock and therefore shifts the _ curve to the ___.

Use the following to answer question : -(Figure: Macroeconomics Equilibrium) Refer to Figure: Macroeconomics Equilibrium.Curve 1 refers to ___,curve 2 refers to _,and curve 3 refers to ___.

A decrease in aggregate demand will generate _ in real GDP and _ in the price level in the short run.

An increase in investment spending leads to _ in the price level and _ in real GDP in the short run.

A negative short-run supply shock _ aggregate output and _ the aggregate price level.

An increase in aggregate demand will generate _ in real GDP and _ in the price level in the short run.

A natural disaster that destroys part of a country's infrastructure is a type of negative ___ shock and therefore shifts the _ curve to the ___.

Suppose that political instability in the Middle East interrupts the supply of oil.The ___ curve shifts _,output _,and prices ___.