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Suppose the economy is producing at the natural rate of output. A decrease 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: 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 economy is producing at the natural rate of output. A decrease 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: D
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 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 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