Question 1

Both the basic Keynesian model and the ADI-IA model have the limitation of assuming that __________ output is fixed,so that __________ output goes up or down relative to a fixed level of __________ output.

Accepted Answer

Both models assume that potential output is fixed, meaning actual output fluctuates around this fixed level of potential output.

Question 2

The Bank of Canada's response to changes in inflation is more complex than identified in the ADI-IA model because

Accepted Answer

The ADI-IA model simplifies inflation by not distinguishing between core inflation and total CPI inflation, whereas the Bank of Canada considers both in its policy decisions.

Question 3

Real-world policy debates are about the __________ of actual output relative to the __________ of potential output,not about the __________ of actual output relative to the __________ of potential output.

Accepted Answer

The answer of Real-world policy debates are about the __________...

Question 4

According to the International Monetary Fund,Canada's potential output has __________ at an annual rate of __________ in recent years.

Accepted Answer

The statement says that Canada's potential output has expanded in recent years, which rules out options D and E. The annual rate of expansion is not likely to be as high as 10% or 7.5%, so options A and B can also be eliminated. Therefore, the only logical choice is C, which states that Canada's potential output has expanded at an annual rate of 2.5%.

Question 5

Assuming fixed potential output is problematic because it may take as much as __________ for an economy to move out of a recession,but potential output changes from __________.

Accepted Answer

An economy can take up to two years to recover from a recession, and potential output can change from quarter to quarter due to various economic factors.

Question 6

In the 1990s,while the __________ ended by 1993,a(n)__________ persisted for much of the decade.

Accepted Answer

The recession ended by 1993 (eliminating options A, C, D, and E), but a lingering economic slowdown persisted through much of the decade, hence the term "recessionary gap" seems like the most appropriate term to describe this situation. Thus, option B is the best choice.

Question 7

The Bank of Canada's response to changes in inflation is more complex than identified in the ADI-IA model because

Accepted Answer

The Bank of Canada's response to changes in inflation is more complex than identified in the ADI-IA model, as the bank responds not only to current inflation but also to expected future inflation. This is not explicitly accounted for in the ADI-IA model. Additionally, the monetary policy rule can change over time, which also complicates the Bank of Canada's response to inflation. However, the self-correcting mechanism is not restricted to only recessionary or expansionary gaps, and the calculation of the monetary policy rule is not a relevant factor in this complexity.

Question 8

Drawing the LRAS curve as a thick line indicates that there is a range of levels of

Accepted Answer

The LRAS curve represents the economy's potential output, meaning the level of output that can be sustained in the long run given the available resources and technology. When the LRAS curve is drawn as a thick line, it indicates that there is a range of output levels that can be achieved without causing inflation or deflation, therefore, ensuring stability in the inflation rate.

Question 9

Rather than being fixed,potential output is __________ all the time thanks to __________ and __________.

Accepted Answer

Potential output refers to the maximum level of output that an economy can produce over a sustained period of time when all resources are used efficiently. This output is not fixed and can increase over time due to factors such as population growth (more people leading to more workers and consumers) and technological advances (leading to greater productivity and efficiency). Option A is incorrect as inflation and depreciation would typically reduce potential output. Option C is incorrect as population growth and inflation can both have positive or negative impacts on potential output depending on other factors. Option D is incorrect as inflation and depreciation would typically reduce potential output. Option E is incorrect as population growth and technological advances would typically increase potential output.

Question 10

Because _________ grows over time,_________ typically persist much longer than _________.

Accepted Answer

Potential output grows over time, so recessionary gaps, which are the difference between potential output and actual output, typically persist longer than the recessions themselves.

Question 11

A __________ can open up without a __________ taking place,if __________ output is growing at an unusually slow rate that is less than the growth rate of __________ output.

Accepted Answer

A recessionary gap can open up without a recession taking place if actual output is growing at an unusually slow rate that is less than the growth rate of potential output.

Quiz 12: The Production Function Approach to Understanding Growth

Both the basic Keynesian model and the ADI-IA model have the limitation of assuming that output is fixed,so that output goes up or down relative to a fixed level of __ output.

The Bank of Canada's response to changes in inflation is more complex than identified in the ADI-IA model because

Real-world policy debates are about the of actual output relative to the of potential output,not about the of actual output relative to the of potential output.

According to the International Monetary Fund,Canada's potential output has at an annual rate of in recent years.

Assuming fixed potential output is problematic because it may take as much as for an economy to move out of a recession,but potential output changes from .

In the 1990s,while the ended by 1993,a(n) persisted for much of the decade.

The Bank of Canada's response to changes in inflation is more complex than identified in the ADI-IA model because

Drawing the LRAS curve as a thick line indicates that there is a range of levels of

Rather than being fixed,potential output is all the time thanks to and __.

Because _____ grows over time,_ typically persist much longer than _____.

A can open up without a taking place,if output is growing at an unusually slow rate that is less than the growth rate of output.

Quiz 12: The Production Function Approach to Understanding Growth

Both the basic Keynesian model and the ADI-IA model have the limitation of assuming that __________ output is fixed,so that __________ output goes up or down relative to a fixed level of __________ output.

The Bank of Canada's response to changes in inflation is more complex than identified in the ADI-IA model because

Real-world policy debates are about the __________ of actual output relative to the __________ of potential output,not about the __________ of actual output relative to the __________ of potential output.

According to the International Monetary Fund,Canada's potential output has __________ at an annual rate of __________ in recent years.

Assuming fixed potential output is problematic because it may take as much as __________ for an economy to move out of a recession,but potential output changes from __________.

In the 1990s,while the __________ ended by 1993,a(n) __________ persisted for much of the decade.

The Bank of Canada's response to changes in inflation is more complex than identified in the ADI-IA model because

Drawing the LRAS curve as a thick line indicates that there is a range of levels of

Rather than being fixed,potential output is __________ all the time thanks to __________ and __________.

Because _________ grows over time,_________ typically persist much longer than _________.

A __________ can open up without a __________ taking place,if __________ output is growing at an unusually slow rate that is less than the growth rate of __________ output.

Both the basic Keynesian model and the ADI-IA model have the limitation of assuming that output is fixed,so that output goes up or down relative to a fixed level of __ output.

Real-world policy debates are about the of actual output relative to the of potential output,not about the of actual output relative to the of potential output.

According to the International Monetary Fund,Canada's potential output has at an annual rate of in recent years.

Assuming fixed potential output is problematic because it may take as much as for an economy to move out of a recession,but potential output changes from .

In the 1990s,while the ended by 1993,a(n) persisted for much of the decade.

Rather than being fixed,potential output is all the time thanks to and __.

Because _____ grows over time,_ typically persist much longer than _____.

A can open up without a taking place,if output is growing at an unusually slow rate that is less than the growth rate of output.