Question

1. The U.S. $ appreciates against the Canadian $, the U.S. experience:

a) an increase in U.S. exports and a shift right of the U.S. AD curve

b) an increase in U.S. exports and a shift left of the U.S. AD curve

c) a decrease in U.S. exports and a shift right of the U.S. AD curve

d) a decrease in U.S. exports and a shift left of the U.S. AD curve

2. The economy is in a recession:

a) input prices rise and output fall

b) both input prices and output rise

c) input prices fall and output rise

d) both input prices and output fall

3. Aggregate demand increase leads to:

a) potential output raises

b) potential output reduces

c) potential output does not change

d) potential output has an unpredictable effect

Answer 1

1. d

The appreciation of the US dollars against the Canadian $ will lead to US $ becoming expensive in terms of Canadian $. This will make the exports less profitable and imports cheaper. Thus, exports will fall and hence AD will shift to the left and fall.

2. d

During a recession, there is significant decline in the economic activity. Both the prices and the output ceases or falls.

3. b

An increase in AD will lead to a rise in the equilibrium output and a fall in the potential output.