Question : 121) Consider the following news headline: “Information technology costs for : 1384403

 

 

121) Consider the following news headline: “Information technology costs for Canadian firms continue to drop.” Choose the statement below that best describes the likely macroeconomic effect.

A) the AD curve shifts to the right; the price level rises and real GDP rises

B) the AD curve shifts to the left; the price level falls and real GDP falls

C) the AS curve shifts to the left; the price level rises and real GDP falls

D) the AS curve shifts to the right; the price level falls and real GDP rises

E) the AD and AS curves both shift to the right; the effect on the price level is indeterminate and real GDP rises

Answer:  D

Diff: 3

Topic:  23.3b. AD shocks and AS shocks

Skill:  Applied

User2:  Qualitative

122) Consider the following news headline: “Threat of widespread labour unrest leads to generous wage increases in several industries.” Choose the statement below that best describes the likely macroeconomic effects.

A) The AS curve shifts to the left; the price level rises and real GDP falls.

B) The AS curve shifts to the right; the price level falls and real GDP rises.

C) The AD curve shifts to the left; the price level falls and real GDP falls.

D) The AD curve shifts to the right; the price level rises and real GDP rises.

E) The AD and AS curves both shift to the left; the effect on the price level is indeterminate and real GDP falls.

Answer:  A

Diff: 3

Topic:  23.3b. AD shocks and AS shocks

Skill:  Applied

Objective:  NEW

User2:  Qualitative

 

123) Consider the following two headlines appearing in the same day: “Federal government announces major new infrastructure investments” and “New technology drives down transport costs.” Choose the statement below that best describes the likely macroeconomic effects.

A) The AS curve shifts to the left; the price level rises and real GDP falls.

B) The AS curve shifts to the right; the price level falls and real GDP rises.

C) The AD curve shifts to the left; the price level falls and real GDP falls.

D) The AD curve shifts to the right; the price level rises and real GDP rises.

E) The AD and AS curves both shift to the right; the effect on the price level is indeterminate and real GDP rises.

Answer:  E

Diff: 3

Topic:  23.3b. AD shocks and AS shocks

Skill:  Applied

Objective:  NEW

User2:  Qualitative

 

124) Suppose the economy is hit by a shock and we observe that the price level has decreased whereas real GDP has increased. We can conclude that this shock was

A) a positive AD shock.

B) a negative AD shock.

C) a positive AS shock.

D) a negative AS shock.

E) a negative technology shock.

Answer:  C

Diff: 2

Topic:  23.3b. AD shocks and AS shocks

Skill:  Applied

Objective:  REVISED

User2:  Qualitative

 

FIGURE 23-4

 

125) Consider Figure 23-4. Initially the economy is in equilibrium at point A. An unexpected shock then shifts both the AD and the AS curves as shown and results in a new equilibrium represented by point B. Which of the following events could cause such a shock?

A) an increase in the net tax rate

B) a decrease in firms’ desired investment expenditures

C) an increase in factor prices

D) a decrease in labour productivity

E) a decrease in the world price of oil

Answer:  E

Diff: 3

Topic:  23.3b. AD shocks and AS shocks

Skill:  Applied

User1:  Graph

User2:  Qualitative

 

126) If the economy’s AS curve is completely horizontal, the multiplier in the AD/AS model is

A) infinitely large.

B) equal to the simple multiplier.

C) smaller than the simple multiplier.

D) is zero.

E) negative.

Answer:  B

Diff: 2

Topic:  23.3c. the multiplier when the price level varies

Skill:  Applied

User2:  Qualitative

127) When the economy’s AS curve is positively sloped, the multiplier in the AD/AS model is

A) constant.

B) equal to one.

C) equal to the simple multiplier.

D) smaller than the simple multiplier.

E) larger than the simple multiplier.

Answer:  D

Diff: 2

Topic:  23.3c. the multiplier when the price level varies

Skill:  Applied

User2:  Qualitative

 

128) If the economy’s AS curve is vertical, the multiplier in the AD/AS model is

A) infinitely large.

B) equal to the simple multiplier.

C) smaller than the simple multiplier.

D) zero.

E) negative.

Answer:  D

Diff: 3

Topic:  23.3c. the multiplier when the price level varies

Skill:  Applied

User2:  Qualitative

 

129) Suppose the government embarks on an infrastructure program, spending $8 billion on the construction of new roads and bridges. What is the size of the multiplier if the AS curve is vertical?

A) 0

B) greater than 1

C) less than 1

D) infinity

E) insufficient information to solve

Answer:  A

Diff: 2

Topic:  23.3c. the multiplier when the price level varies

Skill:  Applied

User2:  Quantitative

 

130) When the price level varies, the multiplier is ________ the simple multiplier.

A) larger than

B) smaller than

C) definitionally the same as

D) not comparable to

E) equal to

Answer:  B

Diff: 2

Topic:  23.3c. the multiplier when the price level varies

Skill:  Recall

User2:  Qualitative

 

FIGURE 23-5