Q: Suppose the inflation rate in Canada is measured by the annual percentage change in the Consumer Price Index (CPI). If the CPI was 110 in 2021 and 115 in 2022, what was the inflation rate in 2022?

$$\frac{115 - 110}{110} \times 100\% = 4.55\%$$

Question 1

During the Lockdown period of the COVID-19 pandemic in Canada, which of the following best describes the combined effect of government regulations and supply chain disruptions on the aggregate supply (AS) curve?

Accepted Answer

A leftward shift of the AS curve, leading to lower output and higher prices.

Question 2

Suppose the Canadian government provides significant income supports and wage subsidies during the Lockdown period. According to the AS/AD model, what is the most likely effect on aggregate demand (AD)?

Accepted Answer

AD shifts to the right because government transfers support household consumption.

Question 3

During the Reopening period, oil prices increased sharply, partly due to Russia’s invasion of Ukraine. Using the AS/AD framework, what is the most direct effect of this oil price shock on the Canadian economy?

Accepted Answer

A leftward shift in the aggregate supply curve, leading to higher inflation.

Question 4

Which of the following best explains the concept of 'pent-up demand' as it applied to the Canadian economy during the Reopening period?

Accepted Answer

A surge in consumption as households spend money they saved during lockdowns.

Question 5

During the Lockdown period, Canadian real GDP per capita fell, inflation decreased, and unemployment rose. Which combination of AS/AD shifts best explains these outcomes?

Accepted Answer

Leftward shifts in both AS and AD.

Question 6

Suppose the aggregate demand curve is represented by $$AD = C + I + G + (X - M). $$During the pandemic, which component was most directly affected by government lockdowns, according to the study materials?

Accepted Answer

Household consumption ($$C)$$

Question 7

If the Global Supply Chain Pressure Index (GSCPI) increases, what is the most likely effect on the short-run aggregate supply (SRAS) curve in the AS/AD model?

Accepted Answer

SRAS shifts to the left, decreasing output and increasing prices.

Question 8

During the Reopening period, Canadian unemployment fell below pre-pandemic levels. Which of the following best explains this outcome using the AS/AD framework?

Accepted Answer

A rightward shift in AD due to pent-up demand and strong household finances.

Question 9

Consider the following scenario: During the Lockdown period, both aggregate supply and aggregate demand shift left. If the leftward shift in AD is larger than the shift in AS, what is the most likely effect on the price level and real GDP?

Accepted Answer

Price level decreases, real GDP decreases.

Question 10

Which of the following real-world events during the pandemic is an example of a negative supply shock?

Accepted Answer

Mandatory closure of non-essential businesses.

Question 11

Suppose the inflation rate in Canada is measured by the annual percentage change in the Consumer Price Index (CPI). If the CPI was 110 in 2021 and 115 in 2022, what was the inflation rate in 2022?

Accepted Answer

$$\frac{115 - 110}{110} 	imes 100\% = 4.55\%$$

Question 12

Which of the following best describes why oil price changes are considered 'real' in the context of the study materials?

Accepted Answer

Because oil prices are adjusted for inflation, isolating changes beyond the general price level.

Question 13

If the Canadian government had not provided stimulus during the Lockdown period, which of the following would most likely have occurred, holding all else constant?

Accepted Answer

Aggregate demand would have shifted further left, leading to a larger decrease in real GDP.

Question 14

During the Reopening period, both supply chain issues and pent-up demand were present. If both AS shifts left (due to supply chain issues) and AD shifts right (due to pent-up demand), what is the most likely effect on inflation?

Accepted Answer

Inflation increases due to both shifts putting upward pressure on prices.

Question 15

Suppose real GDP per capita in Canada was $$60,000 before the pandemic, fell to 55$$,000 during the Lockdown, and rose to $62,000 during the Reopening. What is the percentage change in real GDP per capita from pre-pandemic to the end of the Reopening period?

Accepted Answer

$$\frac{62,000 - 60,000}{60,000} 	imes 100\% = 3.33\%$$

Question 16

Which of the following statements best describes the relationship between unemployment and real GDP per capita in Canada during the pandemic, as shown in the study materials?

Accepted Answer

Unemployment and real GDP per capita moved in opposite directions during both the Lockdown and Reopening periods.

Question 17

If the Canadian economy experienced a leftward shift in aggregate supply due to higher oil prices, but aggregate demand remained unchanged, what would be the expected effect on output and the price level?

Accepted Answer

Output decreases, price level increases.

Question 18

Which of the following is NOT a plausible reason for the rapid rebound in Canadian household consumption during the Reopening period?

Accepted Answer

Ongoing supply chain disruptions limiting the availability of goods.

Question 19

Suppose the Canadian unemployment rate fell from 10% during the Lockdown to 5% during the Reopening. If the labor force remained constant at 20 million, how many more people were employed at the end of the Reopening period compared to the Lockdown?

Accepted Answer

$$(0.10 - 0.05) 	imes 20,000,000 = 1,000,000$$

Question 20

Which of the following best describes why similar government regulations imposed a smaller drag on aggregate supply as the pandemic progressed?

Accepted Answer

Businesses adapted by shifting to remote work and restructuring operations.

COVID-19 and the Canadian Economy: An AS/AD Perspective

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