Consider the Following News Headline: "World Commodity Prices Rise Sharply

question 105

Multiple Choice

Consider the following news headline: "World commodity prices rise sharply." Choose the statement below that best describes the likely macroeconomic effects in Canada.(Remember that Canada is both a producer and a consumer of commodities.)

• A)there is no change in either the AD or the AS curves
• B)the AD curve shifts to the left and the AS curve shifts to the right; the price level falls and the effect on real GDP is indeterminate
• C)the AD and AS curves both shift to the left; the effect on the price level is indeterminate and real GDP decreases
• D)the AD and AS curves both shift to the right; the effect on the price level is indeterminate and real GDP increases
• E)the AD curve shifts to the right and the AS curve shifts to the left; the price level rises and the effect on real GDP is indeterminate

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Definitions:

Free Trade

The unrestricted exchange of goods and services between countries without the imposition of tariffs, quotas, or other trade barriers.

Domestic

Relating to or occurring within a particular country; not foreign or international.

Consumer Surplus

The difference between what consumers are willing to pay for a good or service and what they actually pay, measuring the benefit consumers receive from a transaction.

Free Trade

The absence of tariffs, duties, or trade barriers that allows for the unrestricted import and export of goods between countries.