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Suppose the economy is producing at the natural rate of output. An open market purchase of
bonds by the Bank of Canada will cause ____ in real GDP in the long run and ____ in
the inflation rate in the long run, everything else held constant.
A) an increase; an increase
B) a decrease; a decrease
C) no change; an increase
D) no change; a decrease
Answer: C
Diff: 2 Type: MC Page Ref: 585 - 586
Skill: Applied
Objective List: 24.3 Differentiate between short-run and long-run equilibria in the context of the
aggregate demand and supply framework
Suppose the economy is producing at the natural rate of output. An open market sale of bonds
by the Bank of Canada will cause ____ in real GDP in the short run and ____ in the
inflation rate in the short run, everything else held constant.
A) an increase; an increase
B) a decrease; a decrease
C) no change; an increase
D) no change; a decrease
Answer: B
Diff: 2 Type: MC Page Ref: 585 - 586
Skill: Applied
Objective List: 24.3 Differentiate between short-run and long-run equilibria in the context of the
aggregate demand and supply framework
Suppose the Canadian economy is producing at the natural rate of output. A depreciation of
the Canadian dollar will cause ____ in real GDP in the short run and ____ in the
inflation rate in the short run, everything else held constant. (Assume the depreciation causes no
effects in the supply side of the economy.)
A) an increase; an increase
B) a decrease; a decrease
C) no change; an increase
D) no change; a decrease
Answer: A
Diff: 2 Type: MC Page Ref: 585 - 586
Skill: Applied
Objective List: 24.3 Differentiate between short-run and long-run equilibria in the context of the
aggregate demand and supply framework