Question :
31) Canada’s actual rate of inflation fairly constant around the : 1384480
31) Canada’s actual rate of inflation is fairly constant around the 2% level. We can conclude that
A) real GDP must be below potential GDP because we also have positive unemployment.
B) real GDP must be above potential GDP.
C) the Bank of Canada is accommodating this level of inflation with increases in the money supply.
D) the expectations about inflation are consistently wrong.
E) the economy is consistently experiencing an inflationary gap.
32) Consider the AD/AS model with a sustained and constant rate of inflation. In this situation, the money supply is rising, which tends to reduce interest rates. However, interest rates are actually likely to remain stable. Why?
A) Because the money transmission mechanism does not apply in a situation of sustained inflation.
B) Because the rising price level is decreasing the demand for money which is pushing interest rates up.
C) Because the declining interest rates cause the investment demand curve to shift to the right, which causes interest rates to rise.
D) Because the rising price level is increasing the demand for money which tends to push interest rates up.
E) Because the declining interest rates cause the investment demand curve to shift to the left, which causes interest rates to rise.
33) Refer to Figure 30-1. Assume there are no demand or supply shocks present in this analysis. What explains the movement of the AS curve from to to and so on?
A) unit costs are rising due to excess demand for labour
B) expectations of inflation are causing wage costs to rise continually
C) unit costs are rising because real wages are rising faster than nominal wages
D) expectations of inflation are causing a perpetual inflationary output gap
E) the AS curve shifts up as potential GDP (Y*) is continuously rising
34) Refer to Figure 30-1. What explains the movement of the AD curve from to to and so on?
A) increasing nominal wages cause desired consumption to increase, shifting the AD curve to the right
B) desired investment is increasing, shifting the AD curve to the right
C) the central bank is attempting to reduce inflation by removing monetary validation
D) the process of disinflation
E) the central bank is increasing the money supply and validating the inflationary expectations
35) Refer to Figure 30-1. Which of the following statements about this AD/AS diagram is true?
A) expected inflation exceeds actual inflation
B) actual inflation exceeds expected inflation
C) actual inflation equals expected inflation
D) actual inflation equals output gap inflation
E) expected inflation equals output gap inflation
36) Refer to Figure 30-1. A constant rate of inflation of 3% is portrayed in an AD/AS diagram like this one as
A) an annual shift upward of the AD curve by 3%.
B) an annual shift upward of the AS curve by 3%.
C) an annual increase in the inflation rate of 3%.
D) an annual increase in the equilibrium price level of 3%.
E) Not applicable. The diagram shows the price level, not the inflation rate.
37) Refer to Figure 30-1. Suppose the constant rate of inflation is 3%. In this case,
A) equilibrium GDP and the price level are each increasing at a constant rate of 3% per year.
B) the AS curve is shifting upward by 3% per year and the AD curve remains stationary.
C) the AD curve is shifting upward by 3% per year and the AS curve remains stationary.
D) an annual shift upward of each of the AS and AD curves by 1.5% leads to a constant rate of inflation of 3%.
E) an annual shift upward of the AS curve by 3% is matched by an annual shift upward of the AD curve by 3%.
38) Assuming that the economy is currently in a long-run equilibrium at Y*, a negative aggregate demand shock with no change in the money supply will eventually result in
A) no change in the price level.
B) an ongoing inflation in the economy.
C) a lower price level and GDP below potential output.
D) a higher price level and GDP at potential GDP.
E) a lower price level and GDP at its potential level.
39) A rightward shift in the AD curve accompanied by a leftward shift of the AS curve will result in
A) an increase the price level and an uncertain effect on unemployment.
B) a reduction in the price level and an uncertain effect on unemployment.
C) an increase in unemployment and an uncertain effect on the price level.
D) a reduction in unemployment and an uncertain effect on the price level.
E) a reduction in both unemployment and the price level.
40) A leftward shift in the AD curve accompanied by a leftward shift of the AS curve will
A) increase the price level but have an uncertain effect on GDP.
B) reduce the price level but have an uncertain effect on GDP.
C) increase GDP but have an uncertain effect on the price level.
D) reduce GDP but have an uncertain effect on the price level.
E) increase both GDP and the price level.
