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Suppose the economy is in long-run equilibrium.If there is a tax cut at the same time that major new sources of oil are discovered in the country,what would we expect will happen in the short run?


A) Real GDP will rise, and the price level might rise, fall, or stay the same.
B) Real GDP will fall, and the price level might rise, fall, or stay the same.
C) The price level will rise, and real GDP might rise, fall, or stay the same.
D) The price level will fall, and real GDP might rise, fall, or stay the same.

E) A) and C)
F) C) and D)

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If speculators bid up the value of the dollar in the market for foreign-currency exchange,aggregate demand will shift to the left.

A) True
B) False

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Which of the following characterizes the long-run aggregate-supply curve?


A) It is horizontal.
B) It shows a positive relationship between price level and output.
C) It demonstrates the importance of money in the economy.
D) It shows that money does not influence real GDP in the long run.

E) B) and D)
F) B) and C)

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Which of the following is NOT included in aggregate demand?


A) purchases of stock and bonds
B) purchases of services such as visits to the doctor
C) purchases of capital goods such as equipment in a factory
D) purchases by foreigners of consumer goods produced in Canada

E) A) and B)
F) A) and C)

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Which of the following best characterizes the aggregate-demand curve?


A) It slopes downward because higher prices cause the exchange rate to depreciate.
B) It slopes downward because higher prices cause real wealth to decrease and interest rates to increase.
C) It slopes upward because higher prices cause people to increase their production.
D) It slopes upward because higher prices cause real wealth to increase and interest rates to decrease.

E) A) and B)
F) C) and D)

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What are the effects of an increase in the price level?


A) The interest rate increases, the dollar depreciates, and net exports increase.
B) The interest rate increases, the dollar appreciates, and net exports decrease.
C) The interest rate decreases, the dollar depreciates, and net exports increase.
D) The interest rate decreases, the dollar appreciates, and net exports decrease.

E) None of the above
F) All of the above

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Technological progress shifts the long-run aggregate-supply curve to the right.

A) True
B) False

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Which of the following shifts aggregate demand to the left?


A) an increase in exports
B) a decrease in taxes
C) an increase in imports
D) a decrease in interest rates

E) All of the above
F) A) and C)

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Which of the following would cause stagflation?


A) aggregate demand shifts right
B) aggregate demand shifts left
C) aggregate supply shifts right
D) aggregate supply shifts left

E) All of the above
F) C) and D)

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When taxes decrease,consumption increases.How is this situation represented in the aggregate demand and aggregate supply model?


A) by a movement to the right along a given aggregate-demand curve
B) by shifting aggregate demand to the right
C) by shifting aggregate supply to the right
D) by a movement to the left along a given aggregate-demand curve

E) All of the above
F) B) and C)

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What is the current estimate of the natural rate of unemployment in Canada?


A) 5 percent
B) 7 percent
C) 9 percent
D) 10 percent

E) A) and B)
F) None of the above

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Why does an increase in the price level cause a decrease in the aggregate quantity of goods and services demanded?


A) because as wealth rises, interest rates rise, and the dollar appreciates
B) because as wealth rises, interest rates fall, and the dollar depreciates
C) because as wealth falls, interest rates rise, and the dollar appreciates
D) because as wealth falls, interest rates fall, and the dollar depreciates

E) None of the above
F) A) and B)

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Which of the following shifts the short-run aggregate and the long-run aggregate supply left?


A) a decrease in the price level
B) a decrease in the expected price level
C) a decrease in the capital stock
D) a decrease in the money supply

E) B) and C)
F) B) and D)

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An aggregate-supply (AS)curve is described by the equation Y = YLR + a × (P - PEXP),where Y is current output,YLR is the long run level of output,a is a positive constant,P is the current price level,and PEXP is the expected price level.Suppose YLR = 50,a = 1,and PEXP = 40. a. Draw the long-run aggregate-supply curve in an AD - AS (aggregate demand - aggregate supply) diagram. b. Using the AS equation, find the output corresponding to price levels P = 40 and P = 80 and place the 2 points on your diagram. Draw the short-run AS curve that passes through the two points. c. Identify the expected price level on your graph. d. Suppose the expected price level decreases to PEXP = 30. For current price levels P = 40 and P = 60, recalculate the output levels using the AS formula. Draw the new AS curve and identify the new expected price level.

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a.The long-run aggregate-supply curve is...

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What are the effects of a decrease in Canadian interest rates?


A) a depreciation of the dollar and greater net exports
B) a depreciation of the dollar and smaller net exports
C) an appreciation of the dollar and greater net exports
D) an appreciation of the dollar and smaller net exports

E) A) and D)
F) B) and C)

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Economists mostly agree that the Great Depression was the result of a very large adverse supply shock.

A) True
B) False

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Which of the following is included in the aggregate demand for goods and services?


A) intermediate goods
B) income taxes
C) net exports
D) government deficit

E) B) and D)
F) A) and B)

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Why is the long-run aggregate-supply curve vertical?


A) because population grows slowly
B) because the government controls inflation
C) because money is neutral
D) because prices are stable

E) B) and C)
F) C) and D)

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An increase in the money supply shifts the long-run aggregate-supply curve to the right.

A) True
B) False

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In which of the following situations would the long-run aggregate-supply curve shift right?


A) if the government were to increase the minimum-wage
B) if the government were to make unemployment benefits more generous
C) if the government were to raise taxes on investment spending
D) if the government were to increase immigration

E) A) and B)
F) B) and C)

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