ECON1022 - Chapter 10

If the price level rises and the money wage rate remains constant, the quantity of real GDP supplied ________ and there is a movement along the _______ aggregate supply curve.

• increases; short-run

• increases; long-run

• does not change; short-run

• does not change; long-run

Which of the following statements illustrate fiscal policy?

• The Bank of Canada has increased its reserve requirement.

• The Government of Canada has proposed a hike in the corporate tax rate.

• A stronger dollar has lowered Canadian exports.

• A rise in the expected future profits has increased Canadian investments.

Which of the following economies is facing a stagflation?

• The European economy is experiencing a decrease in real GDP for three quarters and a rise in the price level

• The Chinese economy is facing a rising labour cost.

• The Bank of Canada is purchasing government securities to lower the interest rate.

Toyota and Honda build additional plants in Canada. This event ________short-run aggregate supply and _______ long-run aggregate supply.

• increase; does not change

• does not change; does not change

• does not change; increases

• increases; increases

Long-run aggregate supply is the relationship between the quantity of real GDP supplied and the price level when real GDP equals potential GDP

• TRUE

• FALSE