the economics of money, banking, and financial markets

(Sean Pound) #1
757 $
© 2014 Pearson Canada Inc.$



  1. Everything else held constant, contractionary monetary policies will cause ____.
    A) the quantity of aggregate demand to increase
    B) the quantity of aggregate demand to decrease
    C) aggregate demand to increase
    D) aggregate demand to decrease
    Answer: D
    Diff: 2 Type: MC Page Ref: 573
    Skill: Recall
    Objective List: 24.3 Differentiate between short-run and long-run equilibria in the context of the
    aggregate demand and supply framework




  2. Everything else held constant, a purchase of government securities by the Bank of Canada
    will cause ____.
    A) aggregate demand to increase
    B) aggregate demand to decrease
    C) the quantity of aggregate demand to increase
    D) the quantity of aggregate demand to decrease
    Answer: A
    Diff: 2 Type: MC Page Ref: 574
    Skill: Recall
    Objective List: 24.3 Differentiate between short-run and long-run equilibria in the context of the
    aggregate demand and supply framework




  3. Using the aggregate demand-aggregate supply model, explain and demonstrate graphically
    the short-run and long-run effects of an increase in the money supply.
    Answer: An increase in the money supply increases aggregate demand. In the short run both the
    price level and real output increase. In the long run, wages adjust, decreasing short-run aggregate
    supply, raising inflation further and reducing real output until the economy returns to the natural
    level of output. The long-run result is to only increase the inflation rate.
    Diff: 3 Type: SA Page Ref: 584 - 585
    Skill: Recall
    Objective List: 24.3 Differentiate between short-run and long-run equilibria in the context of the
    aggregate demand and supply framework



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