the economics of money, banking, and financial markets

760 $

© 2014 Pearson Canada Inc.$

7. 
   

   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

   
   


8. 
   

   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

   
   


9. 
   

   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