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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 long 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: 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 Canadian economy is producing at the natural rate of output. An appreciation of
the Canadian dollar will cause ____ in real GDP in the short run and ____ in the
aggregate price level in the short run, everything else held constant. (Assume the appreciation
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: B
Diff: 2 Type: MC Page Ref: 585 - 586
Skill: Recall
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. An appreciation of
the Canadian dollar will cause ____ in real GDP in the short run and ____ in the
aggregate price level in the long run, everything else held constant. (Assume the appreciation
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: D
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