Question :
61) Refer to Figure 30-3. The movement of the economy : 1384483
61) Refer to Figure 30-3. The movement of the economy from E0 to E1 was likely caused by
A) a positive demand shock due to an increase in investment.
B) a positive supply shock caused by improved productivity.
C) a negative demand shock caused by fall in consumption.
D) a negative supply shock caused by higher input prices.
E) an increase in the price level.
62) Refer to Figure 30-3. The movement of the economy from E1 to E2 was likely caused by
A) a negative demand shock associated with a reduction in net exports.
B) a positive supply shock caused by improved productivity.
C) a monetary expansion by the Bank of Canada.
D) an increase in the price level.
E) a negative demand shock combined with a positive supply shock.
63) Refer to Figure 30-3. Suppose that the economy is at E1 and that there is no policy response by the Bank of Canada to this recessionary gap. Compared to the price level and real GDP at , the economy will tend towards a new long-run equilibrium characterized by a(n)
A) lower price level and GDP below the potential level.
B) higher price level and GDP below the potential level.
C) unchanged price level and GDP at the potential level.
D) lower price level and GDP at the potential level.
E) higher price level and GDP above the potential level.
64) Suppose the economy is at full employment and the AS curve shifts upward due to a once-and-for-all increase in the price of oil. If the central bank does not respond to this shock,
A) prices will rise and stay at the higher level with no further inflation.
B) a recessionary gap will be created, which will eventually cause the AS curve to shift back downward.
C) aggregate demand will shift up and cause further inflation.
D) an inflationary gap will be created, which will cause the AS curve to shift upward again.
E) a recessionary gap will be created and will cause a permanent reduction in employment.
65) If the central bank responds to a single negative supply shock with monetary validation, we can expect an increase in
A) the money supply but a decrease in costs and prices.
B) costs but a decrease in real national income.
C) the size of the output gap.
D) costs, the price level, and the money supply.
E) the price level and unemployment.
66) If there is repeated monetary validation to wage-push supply shocks,
A) unemployment will continue to rise.
B) the supply shocks will reverse themselves.
C) workers will have higher real wages.
D) there will be ongoing inflation.
E) there will be a once-and-for-all rise in the price level.
67) Economists use the term “monetary validation” to refer to
A) the money supply being increased in response to a demand shock.
B) the Bank of Canada having a credible policy of zero inflation.
C) the money supply being increased in response to a supply or a demand shock that raises the price level.
D) people who hold smaller money balances at higher rates of interest.
E) money supply increases which have been approved by Parliament.
68) The act of “monetary validation” by a central bank can
A) cause a supply shock.
B) perpetuate inflation.
C) act to reduce inflation.
D) increase unemployment.
E) no longer be carried out by the Bank of Canada.
69) A central bank might decide to “validate” a negative supply shock because
A) there is no other way to return the economy to full employment.
B) the economy might suffer a long slump before wages and prices fall enough to restore full employment.
C) central banks tend to pay little heed to inflation.
D) it is an effective means of preventing inflation.
E) there are no negative effects from this policy action.
70) Isolated negative aggregate supply shocks, in the absence of monetary validation, will
A) eventually be self-correcting as wages slowly fall.
B) never be self-correcting without government policy to expand the money supply.
C) be self-correcting only if the aggregate demand curve shifts.
D) result in a permanent output gap.
E) have no short-run or long-run effects.
