the economics of money, banking, and financial markets

758 $

© 2014 Pearson Canada Inc.$

24.5 Changes in Equilibrium: Aggregate Demand Shocks

1. 
   

   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 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: D
   Diff: 2 Type: MC Page Ref: 585
   Skill: Applied
   Objective List: 24.3 Differentiate between short-run and long-run equilibria in the context of the
   aggregate demand and supply framework

   
   


2. 
   

   Suppose the economy is producing at the natural rate of output. An increase in consumer and
   business confidence 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: A
   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

   
   


3. 
   

   Suppose the economy is producing at the natural rate of output. An increase in consumer and
   business confidence 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: Recall
   Objective List: 24.3 Differentiate between short-run and long-run equilibria in the context of the
   aggregate demand and supply framework