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Exam 8: Modelling Real Gdp and the Price Level in the Short Run

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Question 21

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Figure 8-3 -In Figure 8-3,the three curves are:

A) (1) is long-run aggregate supply, (2) is short-run aggregate supply,and (3) is aggregate demand.
B) (1) is aggregate demand, (2) is short-run aggregate supply,and (3) is long-run aggregate supply.
C) (1) is short-run aggregate supply, (2) is long-run aggregate supply,and (3) is aggregate demand.
D) (1) is long-run aggregate supply, (2) is aggregate demand,and (3) is short-run aggregate supply.

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Question 22

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If the Canadian dollar becomes stronger in international markets,consequences include

A) a decrease in net exports,a decrease in equilibrium real GDP,and a decrease in the price level.
B) an increase in net exports,an increase in equilibrium real GDP,and an increase in the price level.
C) an increase in equilibrium real GDP,an increase in the price level,and no change in net exports.
D) a decrease in the price level but an increase in equilibrium real GDP and net exports.

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Question 23

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Short run changes in the price level can affect real output because

In the short run,if the price level rises then the overall economy can temporarily produce beyond its nominal capacity.One reason for this is that

OPEC's oil embargo of Canada in the 1970s was an example of

________ takes place when aggregate supply increases.

Figure 8-5 -If the aggregate demand curve in Figure 8-5 is D₂,the economy will be experiencing

The effect of an adverse demand shock is to

As the price level ,the short-run aggregate supply curve becomes increasingly steep.

In the short run,an increase in the price level induces firms to expand production because

An increase in long- run aggregate supply could be caused by

Figure 8-3 -Which point or points on Figure 8-3 illustrate an eventual long-run equilibrium?

Short run changes in the ________ can affect real output because some production costs are relatively fixed.

Over the last twenty years,real GDP in the Canadian economy has increased and there has been inflation.This indicates that aggregate demand has ________ more than aggregate supply.

In the ________,an increase in the price level induces firms to expand production because prices of inputs are held constant so the higher prices for their product implies that it is profitable to expand production.

A long run equilibrium occurs at the intersection of the short-run aggregate supply curve and the

Figure 8-1 -According to Figure 8-1,a decrease in aggregate demand between real GDP levels Q₁ and Q₀

Figure 8-3 -According to Figure 8-3,what will the price level be in the new long-run equilibrium?

If the Canadian dollar becomes weaker in international markets,the net effects will include

The difference between the equilibrium level of real GDP and how much the economy could be producing if it were operating at full employment on its long-run aggregate supply curve is known as the