CECN 204 - Exercise related to Chapter 10: Aggregate Demand (AD) and Aggregate
1. The shape of the (AD) curve is explained by the:
A) interest rate, real balances, and foreign trade effects.
B) rate of inflation and the natural rate of unemployment.
C) policies to stabilize prices and reduce unemployment.
D) business expectations.
2. The foreign trade effect suggests that a decrease in the Canadian price level relative to
other countries will:
A) increase the amount of Canadian real output purchased.
B) increase Canadian imports and decrease Canadian exports.
C) shift the AD curve leftward.
D) shift the AS curve upward.
3. Other things equal, if the national incomes of Canada’s major international trading
partners were to rise, our:
A) AS curve would shift to the left.
B) AD curve would shift to the right.
C) AS curve would shift to the right.
D) unemployment in Canada would increase.
4. An increase in investment spending caused by a decline in the interest rate will:
A) shift the AS curve to the left.
B) move the economy up along an existing AD curve.
C) shift the AD curve to the left.
D) shifts the AD curve to the right.
5. The short-run AS curve is up-sloping because:
A) of the interest-rate effect.
B) higher price levels create incentives to expand output when resource
prices remain constant.
C) of the net export effect.
D) higher price levels create an expectation among producers of still higher price