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Macroeconomics, Canadian Ed. (Hubbard et al.)
Chapter 9 Aggregate Demand and Aggregate Supply Analysis
9.1 Aggregate Demand
1) The basic aggregate demand and aggregate supply curve model helps explain
A) short term fluctuations in real GDP and the price level.
B) long term growth.
C) price fluctuations in an individual market.
D) output fluctuations in an individual market.
Answer: A
Diff: 1 Type: MC Page Ref: 254
Topic: Aggregate Demand
Learning Outcome: 9.1 Identify the determinants of aggregate demand and distinguish between
a movement along the aggregate demand curve and a shift of the curve
AACSB: Reflective Thinking
Special Feature: None
2) Canadian National Railways (CN) plays such a large role in moving goods around the country
that there is usually a close relationship between fluctuations in CN's business and fluctuations in
GDP. When CN sees an increase in demand for its services, we can likely expect
A) a decrease in GDP.
B) an increase in GDP.
C) a drop in the exchange rate.
D) an increase in unemployment.
Answer: B
Diff: 1 Type: MC Page Ref: 793/419
Topic: Business Cycle
Special Feature: Chapter Opener: Canadian National Railway and the Business Cycle
3) When the economy enters into a recession, your employer is ________ to reduce your wages
because ________.
A) unlikely; output and input prices generally fall during recession
B) unlikely; lower wages reduce productivity and morale
C) likely; output prices always fall during recession
D) likely; aggregate demand is vertical in the long run
Answer: A
Topic: Business Cycle
Special Feature: Economics in Your Life: Is an Employer Likely to Cut Your Pay During a
Recession?
418
Copyright © 2015 Pearson Canada Inc.
4) The ________ shows the relationship between the price level and quantity of real GDP
demanded.
A) consumer price index
B) aggregate expenditure line
C) 45-degree line
D) aggregate demand curve
Answer: D
5) Because of the slope of the aggregate demand curve, we can say that
A) a decrease in the price level leads to a lower level of real GDP demanded.
B) an increase in the price level leads to no change in the level of real GDP demanded.
C) a decrease in the price level leads to a higher level of real GDP demanded.
D) an increase in the price level leads to a higher level of real GDP demanded.
Answer: C
Diff: 1 Type: MC Page Ref: 254-255
6) All of the following would be considered a positive addition to household wealth except
A) the equity in one's home.
B) 500 shares of Google stock.
C) the balance in your savings account.
D) a credit card balance.
Answer: D
Topic: Household Wealth
419
7) Which of the following best describes the "wealth effect"?

A) When the price level falls, the real value of household wealth falls.
B) When the price level falls, the nominal value of household wealth falls.
C) When the price level falls, the nominal value of household wealth rises.
D) When the price level falls, the real value of household wealth rises.
Answer: D
Topic: Wealth Effect
8) The "interest rate effect" can be described as an increase in the price level that raises the
interest rate and chokes off
A) government spending.
B) government spending and unplanned investment.
C) investment and consumption spending.
D) net exports.
Answer: C
Topic: Interest Rate Effect
9) An increase in the price level results in a(n) ________ in the quantity of real GDP demanded
because ________.
A) decrease; a higher price level reduces consumption, investment, and net exports
B) increase; a higher price level reduces consumption, investment, and net exports
C) decrease; a higher price level increases consumption, investment, and net exports
D) increase; a higher price level increases consumption, investment, and net exports
Answer: A
420
10) When the price level in Canada falls relative to the price level of other countries, ________
will fall, ________ will rise, and ________ will rise.
A) imports; exports; net exports
B) exports; imports; net exports
C) net exports; exports; imports
D) net exports; imports; exports
Answer: A
Topic: International Trade Effect
11) The international trade effect states that

A) an increase in the price level will raise net exports.
B) an increase in the price level will lower net exports.
C) an increase in the price level will raise exports.
D) an increase in the price level will lower imports.
Answer: B
Topic: International Trade Effect
12) Which of the following is one explanation as to why the aggregate demand curve slopes
downward?
A) Decreases in the price level raise the interest rate and increase consumption spending.
B) Decreases in the price level raise the interest rate and increase investment spending.
C) Decreases in the Canada price level relative to the price level in other countries lower net
exports.
D) Decreases in the price level raise real wealth and increase consumption spending.
Answer: D
Special Feature: Don't Let This Happen to YOU!: Understand Why the Aggregate Demand
Curve is Downward Sloping
421
13) An increase in the price level will

A) shift the aggregate demand curve to the left.
B) shift the aggregate demand curve to the right.
C) move the economy up along a stationary aggregate demand curve.
D) move the economy down along a stationary aggregate demand curve.
Answer: C
14) Deflation will

A) increase aggregate demand.
B) increase the quantity of real GDP demanded.
C) decrease aggregate demand.
D) decrease the quantity of real GDP demanded.
Answer: B
Special Feature: Solved Problem: Movements along the Aggregate Demand Curve versus Shifts
of the Aggregate Demand Curve
15) Spending on the war in Afghanistan is essentially categorized as government purchases. How
do increases in spending on the war in Afghanistan affect the aggregate demand curve?
A) They will move the economy up along a stationary aggregate demand curve.
B) They will move the economy down along a stationary aggregate demand curve.
C) They will shift the aggregate demand curve to the left.
D) They will shift the aggregate demand curve to the right.
Answer: D
Topic: Shifts in Aggregate Demand
422
16) The recession of 2008-2009 made many firms pessimistic about the future profitability of
investments. How does this increased pessimism affect the aggregate demand curve?
A) This will move the economy up along a stationary aggregate demand curve.
B) This will move the economy down along a stationary aggregate demand curve.
C) This will shift the aggregate demand curve to the left.
D) This will shift the aggregate demand curve to the right.
Answer: C
17) Higher personal income taxes

A) increase aggregate demand.
B) increase disposable income.
C) decrease aggregate demand.
D) both B and C
Answer: C
18) Which of the following will shift the aggregate demand curve to the right, ceteris paribus?
A) an increase in interest rates
B) a decrease in disposable income
C) a decrease in expected profits for firms
D) an increase in net exports
Answer: D
423
19) German luxury car exports were hurt in 2009 as a result of the recession. How would this
decrease in exports have affected Germany's aggregate demand curve?
A) The aggregate demand curve would have shifted to the right.
B) The aggregate demand curve would not have shifted, but there would have been a movement
up the aggregate demand curve.
C) The aggregate demand curve would not have shifted, but there would have been a movement
down the aggregate demand curve.
D) The aggregate demand curve would have shifted to the left.
Answer: D
20) If the Canadian dollar decreases in value relative to other currencies, how does this affect the
aggregate demand curve?
A) This will move the economy up along a stationary aggregate demand curve.
B) This will move the economy down along a stationary aggregate demand curve.
C) This will shift the aggregate demand curve to the left.
D) This will shift the aggregate demand curve to the right.
Answer: D
AACSB: Analytic Skills
21) Last week, six Swedish kronor could purchase one Canadian dollar. This week, it takes eight
Swedish kronor to purchase one Canadian dollar. This change in the value of the dollar will
________ exports from Canada to Sweden and ________ Canadian aggregate demand.
A) increase; increase
B) decrease; decrease
C) increase; decrease
D) decrease; increase
Answer: B
424
22) Suppose Canadian GDP growth rate is faster relative to other countries' GDP growth rates.
This will
A) move the economy up along a stationary aggregate demand curve.
B) move the economy down along a stationary aggregate demand curve.
C) shift the aggregate demand curve to the left.
D) shift the aggregate demand curve to the right.
Answer: C
23) If aggregate demand just increased, which of the following may have caused the increase?
A) an increase in government purchases
B) an increase in the interest rate
C) an increase in the price level
D) an increase in imports
Answer: A
24) How do lower taxes affect aggregate demand?

A) They increase disposable income, consumption, and aggregate demand.
B) They reduce disposable income, consumption, and aggregate demand.
C) they increase corporate investment and aggregate demand.
D) They increase aggregate supply and thus increase aggregate demand as well.
Answer: A
425
25) Countries which export a large portion of their GDP saw a ________ countries during the
2007-2009 global recession.
A) larger shift in AD than other
B) smaller shift in AD than other
C) the same shift in AD as other
D) no shift in AD at all
Answer: A
Special Feature: Making the Connection: The Role of Exports in Aggregate Demand
26) If you noticed that fashion models were wearing longer skirts, the local store was sold out of
lipstick, and skinny ties were all you saw for sale, it might be reasonable to assume
A) the aggregate demand curve was shifting left
B) the aggregate demand curve was shifting right
C) the federal government was in control of fashion
D) the aggregate demand had a positive slope.
Answer: A
Special Feature: Making the Connection: Predicting Shifts of the Aggregate Demand Curve
426
Figure 9.1
27) Refer to Figure 9.1. Ceteris paribus, an increase in the price level would be represented by a
movement from
A) AD1 to AD2.
B) AD2 to AD1.
C) point A to point B.
D) point B to point A.
Answer: D
28) Refer to Figure 9.1. Ceteris paribus, an increase in interest rates would be represented by a
movement from
A) AD1 to AD2.
B) AD2 to AD1.
Answer: B
427
29) Refer to Figure 9.1. Ceteris paribus, an increase in personal income taxes would be
represented by a movement from
A) AD1 to AD2.
B) AD2 to AD1.
Answer: B
30) Refer to Figure 9.1. Ceteris paribus, a decrease in government spending would be
A) AD1 to AD2.
B) AD2 to AD1.
Answer: B
31) Refer to Figure 9.1. Ceteris paribus, an increase in households' expectations of their future
income would be represented by a movement from
A) AD1 to AD2.
B) AD2 to AD1.
Answer: A
428
32) Refer to Figure 9.1. Ceteris paribus, a decrease in firms' expectations of the future
profitability of investment spending would be represented by a movement from
A) AD1 to AD2.
B) AD2 to AD1.
Answer: B
33) Refer to Figure 9.1. Ceteris paribus, a decrease in the growth rate of domestic GDP relative
to the growth rate of foreign GDP would be represented by a movement from
A) AD1 to AD2.
B) AD2 to AD1.
Answer: A
34) Refer to Figure 9.1. Ceteris paribus, an increase in the value of the domestic currency
relative to foreign currencies would be represented by a movement from
A) AD1 to AD2.
B) AD2 to AD1.
Answer: B
429
35) An increase in imports increases aggregate demand.

Answer: FALSE
Diff: 2 Type: TF Page Ref: 256-257
36) A decrease in disposable income will shift the aggregate demand curve to the left.
Answer: TRUE
37) An increase in the price level shifts the aggregate demand curve to the left.
Answer: FALSE
38) The New Democratic Party has discussed raising income taxes for individuals earning very
high incomes. Explain how these higher income taxes will affect the aggregate demand curve.
Answer: Raising the income tax decreases the amount of disposable income available to those
households. Lower disposable income decreases consumption at every price level. The result is a
shift in the aggregate demand curve to the left.
Diff: 2 Type: ES Page Ref: 256-257
430
39) In September of 2007, Bank of Canada dramatically reduced interest interest rates. Explain
how lower interest rates affect the aggregate demand curve.
Answer: Reducing the interest rate lowers the cost of borrowing to firms and to households. As
a result, both firms and households will increase expenditures. This increase in expenditures will
shift the aggregate demand curve to the right.
Diff: 2 Type: ES Page Ref: 257
40) Using an aggregate demand graph, illustrate the impact of an increase in the price level on
aggregate demand.
Answer:
This illustrates an increase in the price level on the aggregate demand curve. The actual
movement is shown by moving from point B to point A. The price level moves up from P1 to P2,
and the quantity of real GDP demanded declines from Y1 to Y2.
431
41) Using an aggregate demand graph, illustrate the impact of an increase in the interest rate.
Answer:
The increase in the interest rate will cause consumption expenditures and investment
expenditures to decline. This will result in a parallel leftward shift in the aggregate demand
curve. We start on the curve AD1 and the increase in the interest rate will move us to AD2. At the
price level P1, the demand for real GDP declines from Y1 to Y2.
9.2 Aggregate Supply
1) The level of aggregate supply in the long-run is not affected by

A) changes in technology.
B) changes in the capital stock.
C) changes in the price level.
D) changes in the number of workers.
Answer: C
Topic: Long-Run Aggregate Supply
Learning Outcome: 9.2 Identify the determinants of aggregate supply and distinguish between a
movement along the short-run aggregate supply curve and a shift of the curve
432
2) Potential GDP refers to the level of

A) real GDP in the long run.
B) nominal GDP in the long run.
C) real GDP in the short run.
D) nominal GDP in the short run.
Answer: A
3) The long-run aggregate supply curve

A) has a negative slope.
B) has a steep but positive slope.
C) is horizontal.
D) is vertical.
Answer: D
4) If stricter immigration laws are imposed and many foreign workers in Canada are forced to go
back to their home countries
A) the long-run aggregate supply curve will shift to the right.
B) the long-run aggregate supply curve will shift to the left.
C) we will move up along the long-run aggregate supply curve.
D) we will move down along the long-run aggregate supply curve.
Answer: B
433
5) What is potential GDP?

A) It is the level of real GDP in the long run.
B) It is the difference between current GDP and maximum GDP.
C) It is the level of real GDP in the short run.
D) It is the level of GDP at which inflation is constant.
Answer: A
6) Full-employment GDP is also known as

A) realized GDP.
B) potential GDP.
C) politico-economic GDP.
D) balanced-budget GDP.
Answer: B
7) The long-run aggregate supply curve shows the relationship between the ________ and
________.
A) inflation rate; quantity of real GDP demanded
B) real interest rate; quantity of real GDP supplied
C) nominal interest rate; quantity of real GDP supplied
D) price level; quantity of real GDP supplied
Answer: D
434
8) On the long-run aggregate supply curve

A) a decrease in the price level decreases the level of potential GDP.
B) a decrease in the price level increases the aggregate quantity of GDP supplied.
C) a decrease in the price level decreases the aggregate quantity of GDP supplied.
D) a decrease in the price level has no effect on the aggregate quantity of GDP supplied.
Answer: D
9) Changes in the price level

A) increase the level of aggregate supply in the long run.
B) decrease the level of aggregate supply in the long run.
C) do not affect the level of aggregate supply in the long run.
D) increase the level of aggregate supply in the long run only at very high levels of output.
Answer: C
10) The long-run aggregate supply curve will shift to the right if the economy
A) experiences technological change.
B) has a decrease in population.
C) experiences high levels of inflation.
D) net exports decrease.
Answer: A
435
11) Suppose a developing country receives more machinery and capital equipment as foreign
entrepreneurs increase the amount of investment in the economy. As a result
A) the long-run aggregate supply curve will shift to the right.
B) the long-run aggregate supply curve will shift to the left.
C) the economy will move up along the long-run aggregate supply curve.
D) the economy will move down along the long-run aggregate supply curve.
Answer: A
12) Which aggregate supply curve has a positive slope?

A) long run only
B) short run only
C) both long run and short run
D) neither long run nor short run
Answer: B
Topic: Short-Run Aggregate Supply
13) The short-run aggregate supply curve has a(n) ________ slope because as prices of
________ rise, prices of ________ rise more slowly.
A) positive; final goods and services; inputs
B) infinite; final goods and services; inputs
C) positive; inputs; final goods and services
D) infinite; inputs; final goods and services
Answer: A
436
14) All of the following are reasons why the wages of workers and the prices of inputs rise more
slowly than the prices of final goods and services except
A) unions are successful in pushing up wages.
B) firms are often slow to adjust wages.
C) contracts make prices and wages "sticky."
D) menu costs make some prices sticky.
Answer: A
15) An increase in the price level will

A) shift the short-run aggregate supply curve to the left.
B) shift the short-run aggregate supply curve to the right.
C) move the economy up along a stationary short-run aggregate supply curve.
D) move the economy down along a stationary short-run aggregate supply curve.
Answer: C
Topic: Shifts in the Short-Run Aggregate Supply Curve
16) If, due to a recession, workers begin to leave Canada to search for temporary work in other
countries until the recession has ended, this will
A) shift the short-run aggregate supply curve of the other country to the left.
B) shift the short-run aggregate supply curve of the other country to the right.
C) move the other country's economy up along a stationary short-run aggregate supply curve.
D) move the other country's economy down along a stationary short-run aggregate supply curve.
Answer: B
437
17) The invention of the cotton gin ushered in the Industrial Revolution and began a long period
of technological innovation. What did this technological change do the short-run supply curve?
A) It shifted the short-run aggregate supply curve to the left.
B) It shifted the short-run aggregate supply curve to the right.
C) It moved the economy up along a stationary short-run aggregate supply curve.
D) It moved the economy down along a stationary short-run aggregate supply curve.
Answer: B
18) Hurricane Katrina destroyed oil and natural gas refining capacity in the Gulf of Mexico
which subsequently drove up natural gas, gasoline, and heating oil prices. Three years later, once
the refining capacity was restored, these prices came back down. The restoration of refining
capacity should
Answer: B
19) When the price level rises from 110 to 115, the aggregate level of GDP supplied rises from
$80 billion to $120 billion. This ________ relationship represents the ________ relationship
between the quantity of real GDP firms are willing to supply and the price level.
A) negative; short-run
B) positive; short-run
C) negative; long-run
D) positive; long-run
Answer: B
438
20) If full-employment GDP is equal to $1.9 trillion, what does the long-run aggregate supply
curve look like?
A) It is a horizontal line at $1.9 trillion of real GDP.
B) It is a vertical line at a level of real GDP below $1.9 trillion.
C) It is a vertical line at $1.9 trillion of real GDP.
D) It is a vertical line at a level of real GDP above $1.9 trillion.
Answer: C
21) Workers expect inflation to rise from 3% to 5% next year. As a result, this should
Answer: A
22) Workers and firms both expect that prices will be 2.5% higher next year than they are this
year. As a result
A) workers will be willing to take lower wages next year, but not lower than a 2.5 percent
decrease.
B) the purchasing power of wages will rise if wages increase by 2.5%.
C) the short-run aggregate supply curve will shift to the left as wages increase.
D) aggregate demand will increase by 2.5%
Answer: C
439
23) Which of the following would cause the short-run aggregate supply curve to shift to the
right?
A) an increase in the price level
B) a decrease in inflation expectations
C) a technological advance
D) an increase in interest rates
Answer: C
Figure 9.2
24) Refer to Figure 9.2. Ceteris paribus, an increase in the labor force would be represented by a
movement from
A) SRAS1 to SRAS2.
B) SRAS2 to SRAS1.
Answer: A
440
25) Refer to Figure 9.2. Ceteris paribus, a decrease in the capital stock would be represented by
a movement from
A) SRAS1 to SRAS2.
B) SRAS2 to SRAS1.
Answer: B
26) Refer to Figure 9.2. Ceteris paribus, an increase in productivity would be represented by a
movement from
A) SRAS1 to SRAS2.
B) SRAS2 to SRAS1.
Answer: A
27) Refer to Figure 9.2. Ceteris paribus, an increase in the price level would be represented by a
movement from
A) SRAS1 to SRAS2.
B) SRAS2 to SRAS1.
Answer: C
441
28) Refer to Figure 9.2. Ceteris paribus, an increase in the expected future price level would be
A) SRAS1 to SRAS2.
B) SRAS2 to SRAS1.
Answer: B
29) Refer to Figure 9.2. Ceteris paribus, an increase in workers and firms adjusting to having
previously overestimated the price level would be represented by a movement from
A) SRAS1 to SRAS2.
B) SRAS2 to SRAS1.
Answer: A
30) Refer to Figure 9.2. Ceteris paribus, an increase in the expected price of an important
natural resource would be represented by a movement from
A) SRAS1 to SRAS2.
B) SRAS2 to SRAS1.
Answer: B
442
31) The long-run aggregate supply curve is vertical.

Answer: TRUE
32) When potential GDP increases, long-run aggregate supply also increases.
Answer: TRUE
33) A supply shock causes the long-run aggregate supply curve to shift left, decreasing the price
level.
Answer: FALSE
Topic: Supply Shock
34) Explain why the long-run aggregate supply curve is vertical.

Answer: The long-run aggregate supply curve is vertical because in the long run, changes in the
price level do not affect the number of workers, the capital stock, or technology, which are the
factors that determine potential GDP.
443
35) What variables cause the short-run aggregate supply curve to shift? For each variable,
identify whether an increase in that variable will cause the short-run aggregate supply curve to
shift to the right or to the left.
Answer: The variables that will cause the short-run aggregate supply to shift are: the size of the
labor force, the size of the capital stock, productivity, the expected future price level, workers
and firms adjusting to having previously underestimated the price level, and the expected price
of an important natural resource. Increases in the labor force, the capital stock, or productivity
will cause the short-run aggregate supply curve to shift to the right. Increases in the expected
future price level, increases in the price of an important natural resource, and workers and firms
adjusting to having previously underestimated the price level will cause the short-run aggregate
supply curve to shift to the left.
36) Explain how "menu costs" affect the slope of the short-run aggregate supply curve.
Answer: Menu costs make some prices sticky. As the price level rises, some firms will be
reluctant to raise their prices. Sales at those firms will increase, and their output will increase.
This creates the possibility that an increase in the price level will increase output. More menu
costs can make the short-run aggregate supply curve flatter.
9.3 Macroeconomic Equilibrium in the Long Run and the Short Run
1) Long-run macroeconomic equilibrium occurs when

A) aggregate demand equals short-run aggregate supply.
B) aggregate demand equals short-run aggregate supply and they intersect at a point on the long-
run supply curve.
C) structural and frictional unemployment equals zero.
D) output is above potential GDP.
Answer: B
Topic: Long-Run Macroeconomic Equilibrium
Learning Outcome: 9.3 Use the aggregate demand and aggregate supply model to illustrate the
difference between short-run and long-run macroeconomic equilibrium
444
2) An increase in aggregate demand results in a(n) ________ in the ________.

A) recession; long run
B) expansion; long run
C) expansion; short run
D) recession; short run
Answer: C
Topic: Short -Run Macroeconomic Equilibrium
3) Suppose there has been an increase in investment. As a result, real GDP will ________ in the
short run, and ________ in the long run.
A) increase; increases further
B) increase; decrease to its initial value
C) decrease; decrease further
D) decrease; increase to its initial level
Answer: B
Topic: Short-Run and Long-Run Effects of a Change in Aggregate Demand
4) A decrease in investment causes the price level to ________ in the short run and ________ in
the long run.
A) increase; increase further
B) increase; decrease
C) decrease; decrease further
D) decrease; increase
Answer: C
445
5) An increase in aggregate demand causes an increase in ________ only in the short run, but
causes an increase in ________ in both the short run and the long run.
A) the price level; real GDP
B) real GDP; real GDP
C) the price level; the price level
D) real GDP; the price level
Answer: D
6) A decline in the American economy means

A) a decline in Canadian exports and a potential Canadian recession.
B) a decline in Canadian exports and a guaranteed Canadian recession.
C) an increase in Canadian exports and a potential Canadian boom.
D) a Canadian stock market crash.
Answer: A
Special Feature: Making the Connection: Does the Canadian Economy Import Recessions?
7) When the aggregate demand curve and the short-run aggregate supply curve intersect
A) the long-run aggregate supply curve must also intersect at the same point.
B) inflation must be increasing.
C) structural and frictional unemployment equal zero.
D) the economy is in short-run macroeconomic equilibrium.
Answer: D
446
8) Assume interest rates in the economy have fallen. How will this affect aggregate demand and
equilibrium in the short run?
A) Aggregate demand will rise, the equilibrium price level will rise, and the equilibrium level of
GDP will rise.
B) Aggregate demand will rise, the equilibrium price level will fall, and the equilibrium level of
GDP will rise.
C) Aggregate demand will fall, the equilibrium price level will fall, and the equilibrium level of
GDP will fall.
D) Aggregate demand will fall, the equilibrium price level will rise, and the equilibrium level of
GDP will fall.
Answer: A
9) A decrease in aggregate demand in the economy will have what effect on macroeconomic
equilibrium in the long run?
A) The price level will fall, and the level of GDP will be unaffected.
B) The price level will fall, and the level of GDP will fall.
C) The price level will rise, and the level of GDP will fall.
D) The price level will rise, and the level of GDP will be unaffected.
Answer: A
10) If the short-run aggregate supply increases by less than the long-run aggregate supply, then,
at the short-run equilibrium
A) GDP will be below potential GDP.
B) aggregate demand will increase.
C) GDP will be above potential GDP.
D) GDP will be equal to potential GDP.
Answer: A
447
11) The process of an economy adjusting from a recession back to potential GDP in the long run
without any government intervention is known as
A) monetary policy.
B) an automatic mechanism.
C) "releasing sticky prices."
D) fiscal policy.
Answer: B
12) Suppose the economy is at full employment and firms become more optimistic about the
future profitability of new investment. Which of the following will happen in the short run?
A) Output will decline.
B) Prices will decline.
C) Unemployment will decline.
D) The aggregate demand curve will shift to the left.
Answer: C
Topic: Expansion in the Short Run
13) Suppose the economy is at a short-run equilibrium GDP that lies below potential GDP.
Which of the following will occur because of the automatic mechanism adjusting the economy
back to potential GDP?
A) Output will decrease.
B) Prices will increase.
C) Unemployment will rise.
D) Short-run aggregate supply will shift to the right.
Answer: D
Topic: Expansion in the Long Run
448
14) Why does the short-run aggregate supply curve shift to the right in the long run, following a
decrease in aggregate demand?
A) Workers and firms adjust their expectations of wages and prices downward and they accept
lower wages and prices.
B) Workers and firms adjust their expectations of wages and prices downward and they push for
higher wages and prices.
C) Workers and firms adjust their expectations of wages and prices upward and they push for
higher wages and prices.
D) Workers and firms adjust their expectations of wages and prices upward and they accept
lower wages and prices.
Answer: A
15) The automatic mechanism ________ the price level in the case of ________ and ________
the price level in the case of ________.
A) raises; recession; lowers; expansion
B) raises; expansion raises; recession
C) lowers; expansion; lowers; recession
D) lowers; recession; raises; expansion
Answer: D
449
Figure 9.3
16) Refer to Figure 9.3. Which of the points in the above graph are possible long-run equilibria?
A) A and B
B) A and C
C) A and D
D) B and D
Answer: B
17) Refer to Figure 9.3. Which of the points in the above graph are possible short-run equilibria
but not long-run equilibria? Assume that Y1 represents potential GDP.
A) A and B
B) A and C
C) C and D
D) B and D
Answer: D
450
18) Refer to Figure 9.3. Suppose the economy is at point A. If investment spending increases in
the economy, where will the eventual long-run equilibrium be?
A) A
B) B
C) C
D) D
Answer: C
Topic: Expansion in the Long Run
19) Refer to Figure 9.3. Suppose the economy is at point C. If government spending decreases
in the economy, where will the eventual long-run equilibrium be?
A) A
B) B
C) C
D) D
Answer: A
Topic: Recession in the Long Run
20) Refer to Figure 9.3. Suppose the economy is at point A. If the economy experiences a supply
shock, where will the eventual short-run equilibrium be?
A) A
B) B
C) C
D) D
Answer: B
Topic: Supply Shock
451
21) ________ of unemployment during ________ make it easier for workers to ________ wages.
A) High levels; a recession; negotiate higher
B) Low levels; an expansion; negotiate higher
C) Low levels; a recession; accept lower
D) High levels; an expansion; accept lower
Answer: B
Topic: Expansion and Automatic Adjustment
22) A negative supply shock in the short run causes

A) the aggregate supply curve to shift to the left.
B) the price level to fall.
C) unemployment to fall.
D) equilibrium real GDP to rise.
Answer: A
Topic: Supply Shock
23) Which of the following is considered a negative supply shock?

A) increasing immigration in the economy causes the labor supply to rise
B) an improvement in technology
C) an increase in unemployment
D) an unexpected decrease in the refining capacity for oil
Answer: D
Topic: Supply Shock
452
24) The long-run adjustment to a negative supply shock results in

A) the short-run aggregate supply curve shifting to the right.
B) the price level rising.
C) unemployment rising.
D) workers being willing to accept higher wages.
Answer: A
Topic: Supply Shock
25) In the long run

A) GDP > potential GDP.
B) unemployment is at its natural rate.
C) LRAS and SRAS lie on the same line.
D) the inflation rate is zero.
Answer: B
26) When the price of oil rises unexpectedly, the equilibrium price level ________ and the
unemployment rate ________ in the short run.
A) rises; falls
B) rises; rises
C) falls; falls
D) falls; rises
Answer: B
Topic: Supply Shock
453
27) After an unexpected ________ in the price of oil, the long-run adjustment decreases the price
level and ________ the unemployment rate as they return to their original levels.
A) increase; increases
B) increase; decreases
C) decrease; increases
D) decrease; decreases
Answer: B
Topic: Supply Shock
28) Stagflation occurs when

A) inflation rises and GDP rises.
B) inflation falls and GDP rises.
C) inflation rises and GDP falls.
D) inflation falls and GDP falls.
Answer: C
Topic: Stagflation
29) Stagflation usually results from

A) a supply shock.
B) a decrease in aggregate demand.
C) an increase in aggregate supply.
D) an increase in aggregate demand.
Answer: A
Topic: Stagflation
454
30) An economy is likely to recover from a recession quickly (without government intervention)
when
A) it is caused by a negative supply shock and wages are fixed.
B) it is caused by a leftward shift in aggregate demand and wages are fixed.
C) it is caused by a leftward shift in aggregate demand and wages are flexible.
D) it is caused by a financial crisis.
Answer: C
Special Feature: Making the Connection: Does Government Intervention Help Fight a
Recession?
31) At a short-run macroeconomic equilibrium, real GDP is always equal to potential GDP.
Answer: FALSE
Diff: 1 Type: TF Page Ref: 267
32) Stagflation occurs when aggregate supply and aggregate demand both increase.
Answer: FALSE
33) A decrease in government spending will result in a decrease in the price level and a decrease
in real GDP in the long run.
Answer: FALSE
455
34) Using aggregate demand and aggregate supply, explain what happens in the short run if the
Bank of Canada lowers interest rates in the economy? Be sure to detail what happens to
aggregate demand, the price level, the level of GDP, and unemployment. Assume that the
economy is at full employment before the interest rate decrease.
Answer: A decrease in the interest rate will cause aggregate demand to increase. Interest costs
are part of the cost of borrowing and as they fall, both firms and households will increase
spending. This shifts the aggregate demand curve to the right. This raises equilibrium GDP
above potential GDP. As production increases for many firms, they begin to hire more workers,
and unemployment falls. The increasing demand also raises the price level. The economy is
expanding.
Topic: Recession in the Short Run
35) Explain how the economy moves back to full employment from recession. Be sure to detail
what happens to short-run aggregate supply, unemployment, equilibrium GDP and the price
level.
Answer: When an economy enters a recession, sales fall and unemployment rises via the
automatic adjustment mechanism. The unemployment resulting from the recession makes
workers more willing to accept lower wages. The slack demand will make firms willing to accept
lower prices for their goods. In addition, the decline in the price level that occurs when the
economy went into recession also makes workers willing to accept lower wages, and firms
accept lower prices. This shifts the short-run aggregate supply curve to the right and moves the
economy back toward potential GDP. Unemployment falls back to the natural level, and the
price level falls.
Topic: Recession in the Long Run
456
36) Starting from long-run equilibrium, use the basic aggregate demand and aggregate supply
diagram to show what happens in both the long run and the short run when there is a decline in
wealth.
Answer:
Before the decline in demand, the economy begins at point C with GDP at Y1. The decline in
wealth shifts the aggregate demand curve to the left from AD1 to AD2. As a result, prices fall and
output declines. Unemployment also rises as the economy falls below potential GDP (point B).
The slowing economy causes workers and firms to adjust their expectations about wages and
prices downward. Eventually this will cause them to accept lower wages and prices, which will
shift the short-run aggregate supply curve to the right. Eventually, the economy moves to point
A, with real GDP restored back to potential GDP at Y1 and prices even lower. The
unemployment rate goes back to the natural level.
457
37) Beginning with long-run equilibrium, use the aggregate demand and aggregate supply model
to illustrate what happens in the short run when the economy suffers a negative supply shock.
Answer:
The economy is at point A with the price level equal to P1 and the amount of real GDP at Y1. Y1
is also the level of potential output. A negative supply shock, such as an unexpected increase in
the price of oil, will shift the SRAS curve to the left, so that the economy ends up at point B. This
will increase the price level from P1 to P2. Unemployment rises as real GDP falls to Y2 which is
below potential GDP.
Topic: Supply Shock
458
38) Using the aggregate supply and demand model, illustrate what happens in the long run when
the economy suffers a supply shock. Begin your analysis by assuming the economy has suffered
the supply shock in the short run, but has not yet adjusted to it in the long run.
Answer:
The economy is at point B with the price level equal to P2 and the amount of real GDP at Y2.
The economy is at short-run equilibrium after a supply shock. Rising unemployment and falling
output result in workers being willing to accept lower wages and firms being willing to accept
lower prices. This will shift the SRAS curve to the right as their expectations change. This lowers
the price level from P2 to P1 and raises real GDP from Y2 to Y1. Unemployment falls as real
GDP rises back to potential GDP at Y1.
Topic: Supply Shock
9.4 A Dynamic Aggregate Demand and Aggregate Supply Model
1) Which of the following is not an assumption made by the dynamic model of aggregate
demand and aggregate supply?
A) Potential real GDP increases continuously.
B) The aggregate demand curve shifts to the right during most periods.
C) The short-run aggregate supply curve shifts to the right except during periods when workers
and firms expect higher wages.
D) Aggregate demand and potential real GDP decrease continuously.
Answer: D
Topic: Dynamic Aggregate Demand and Aggregate Supply Model
Learning Outcome: 9.4 Use the dynamic aggregate demand and aggregate supply model to
analyze macroeconomic conditions
459
2) Which of the following is one reason for the decline in aggregate demand that led to the
recession of 2008-2009?
A) falling oil prices
B) increases in housing prices
C) the US financial crisis
D) a decline in government spending
Answer: C
Topic: The Canadian Recession of 2008-2009
Figure 9.4
3) Refer to Figure 9.4. In the figure above, LRAS1 and SRAS1 denote LRAS and SRAS in year 1,
while LRAS2 and SRAS2 denote LRAS and SRAS in year 2. Given the economy is at point A in
year 1, what is the growth rate in potential GDP in year 2?
A) 8%
B) 9.1%
C) 10%
D) 12%
Answer: C
460
4) Refer to Figure 9.4. Given the economy is at point A in year 1, what is the inflation rate
between year 1 and year 2?
A) 0.9%
B) 1.8%
C) 2.7%
D) 3.0%
Answer: B
5) Refer to Figure 9.4. Given the economy is at point A in year 1, what will happen to the
unemployment rate in year 2?
A) It will rise.
B) It will fall.
C) It will remain constant.
D) not enough information to answer the question
Answer: A
6) When people became less concerned with the underlying value of their houses and instead
focused on the expectations of the prices of their houses increasing, ________ occurred.
A) stagflation
B) an automatic destabilizer
C) a housing bubble
D) a supply shock
Answer: C
461
7) At the beginning of the recession of 2008-2009, real GDP in Canada was ________ potential
GDP, and in mid 2010, real GDP was ________ potential GDP.
A) below; above
B) below; below
C) above; below
D) above; above
Answer: C
8) In the dynamic aggregated demand and aggregate supply model, if AD shifts faster than AS
A) inflation occurs.
B) deflation occurs.
C) stagflation occurs.
D) disinflation occurs.
Answer: A
9) Which of the following could explain why there is an increase in potential GDP but the
equilibrium level of GDP does not rise?
A) SRAS shifted to the right by more than LRAS.
B) AD shifted to the right by more than SRAS.
C) AD shifted to the right by less than SRAS.
D) SRAS and AD do not shift.
Answer: D
Special Feature: Solved Problem: Showing the Millennium Economic Boom on a Dynamic
Aggregate Demand and Aggregate Supply Graph
462
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A Killing Play
He began to study music with C. G. Müller, for Beethoven’s works

made him decide that he wanted to know more. He also was taught
by Theodore Weinlig, the cantor or singer of St. Thomas’ school. At
sixteen, he wrote a play which had so tragic a plot that he killed off
forty-two of the characters, and afterwards said, he had to bring
some back as ghosts to wind up the drama, for there were no
characters left alive! His drama reading made him exaggerate
tragedy in his own play! After this he wrote a sonata, a polonaise and
a symphony, in classic style, performed in 1833.
In 1830 there had been a political revolution in Germany and it
greatly impressed the young man for he was an independent thinker
in politics as well as in music.
He visited Vienna in 1832 but he found it so appreciative of
Hérold’s opera Zampa and Strauss’ waltzes that he could not bear it
and left almost immediately. He was much like Beethoven in
disposition for he was quick to anger and kind in great gusts, and
could be most agreeable to his friends.
His Early Operas
He had gone to Vienna with his symphony but showed it to no one;

it is said that Mendelssohn saw it but forgot about it. Here he wrote
the poem and some poor music for an opera Die Hochzeit (The
Wedding) which he tore up the next year.
Then off to Prague went he (1832), and wrote his first libretto, for
you must remember he did not go to people like Metastastio or
Molière for his libretto but wrote his own. Had he not been a
composer he certainly would have been a literary man. In fact, he
was, for he wrote more pamphlets and books than many a writer!
Yet, he showed his real genius as a composer.
But he was so poor now that he was glad to get a job as a chorus
master at the mean salary of 10 florins ($5) a month! It was here he
wrote the opera Die Feen (The Fairies) a wildly romantic work, after
which he returned again to Leipsic. For the first time he heard
Wilhelmine Schroeder-Devrient sing, whose marvelous talent
influenced him all his life. In 1834 as a conductor of a troupe with
headquarters in Magdeburg, he tried to produce his second opera the
tragic Das Liebesverbot (Forbidden Love), modeled after
Shakespeare’s Measure for Measure; but it was so badly given that it
was a dismal failure. The second was like Bellini and Auber, both of
whom he admired and it was too early in his life (twenty-one) to
show new ways of composing.
Soon he went to Königsberg, where (1836) he married Wilhelmina
Planer, a young actress whom he met in the theatre, and he spent the
year trying to get his Magdeburg troupe out of difficulties. Later he
was given a post in Riga.
While at Riga his duty was to lead orchestral concerts, at many of
which Ole Bull the Norwegian violinist played, here too, he read
Rienzi of Bulwer-Lytton, the English writer, and wrote a libretto and
opera on the showy model of Meyerbeer. He said himself that it “out-
Meyerbeered Meyerbeer.” Leaving hastily, debts and all, with Rienzi
in his hand, he went to Paris (the goal of all composers) in a sailing
vessel, with his new wife and a dog named Robber, stopping over in
England. The trip took four long perilous weeks. From the sailors he
learned the story of the Flying Dutchman, which he afterwards used
in his opera of that name.
We wish we could tell you the whole story of this gale-tossed,
unhappy mariner, the Flying Dutchman, and how at last he found
happiness and relief from storms and troubles of life by finding his
mate in the maiden Senta. You will love the music and the story
which is woven about Senta in the beautiful ballad bearing her name.
In this opera, Wagner first used the leit-motif or leading theme
(particularly in the overture) which he used as we use a name or
description of a person, idea or thing, except that he used them in
music instead of in words. For example, when Senta comes in to the
story, either as someone’s thought or as a person, or when she is
spoken of, her theme is heard, woven into the music. So it is when
Siegfried appears in the operas of the Ring of the Nibelungen, you
hear the Siegfried theme; when the Gold is mentioned, you hear the
Gold theme; or if the Giants appear, their theme is heard,—so it is
with the Dragon and everything connected with the story. You hear
in some form, their name plates, as it were, and so by listening, you
can follow just what is going on through the music. This is one of the
things that Wagner developed, though Gluck and others had
attempted to use it.
During his stay in Paris, he had a struggle for existence and did
everything possible to gain a livelihood, while striving to get a
hearing for his compositions. He wrote, in his misery, the Faust
Overture, the first work to win recognition.
He went to see Meyerbeer on his way to Paris, for Meyerbeer was
very popular and his approval could have aided poor Richard. Some
say Meyerbeer helped him and others say he did not. Wagner gained
little from him. Even when he first went to see Liszt, who later
became his best friend, it is said that Liszt snubbed him. Wagner
never stopped writing his theories for the papers, and a hot-headed
young scribbler he was! Yet withal he submitted the story of The
Flying Dutchman to the director of the Paris Opera House who
rejected it as an opera, but gave the story to Dietsch, the conductor,
to write the music. This did not daunt Wagner, who, after a defeat,
worked harder or his next task. So he wrote another Flying
Dutchman, story and music and orchestration in seven weeks!
However, luck began to favor him, and Rienzi (1842) was accepted
by the Dresden Opera and was so successful that he became
conductor in Dresden, which saved him for a while from money
worries, and The Flying Dutchman, which had gone begging so long,
was loudly demanded. Strange to say, this wonderful legend did not
succeed, for the people missed the little tricks of Meyerbeer and they
could not understand the flowing music in new form. Wagner was
very disappointed for the story was one of the old German (Teuton)
legends and he thought the German people would love it.
Later, however, Spohr gave it with great success at Cassel, and won
Wagner’s gratitude for his understanding and kindness.
Now comes Tannhäuser, an entrancing legend which inspired him
to study more deeply into the Teutonic legends. This he produced in
Dresden, and other German cities played it later. Everything became
topsy-turvy in the musical and political world. Wagner was writing
fiery things about freedom in music and politics, nothing to amount
to much, but enough to rouse his enemies, who became hateful and
hissed Tannhäuser,—calling it nerve-killing, distressing music
without melody. How could anyone fail to find melody in Oh Thou
Sublime Sweet Evening Star, the Pilgrim’s Chorus, the Venusburg
music and the colorful overture with themes of the whole opera? Yet
music affects people this way when it is new in structure. “There is
no melody” is said today when the so-called modern music is played.
This should make us stop and listen carefully and look back on what
happened to the writers of the past when they dared differ from the
crowd. Perhaps calling your attention to this will make you listen
with open ears and open minds to the new, which so soon becomes
the familiar.
So Wagner, while conducting other operas in Dresden, began on
Lohengrin and finished it in 1847. But he was impetuous and his
written articles irritated the people. His ideas were fiery and his
musical speech so odd, that even Schumann, who was very
sympathetic, only partially understood him or his music. However he
did say that Wagner would have a great influence on German opera,
but Mendelssohn, after hearing Tannhäuser, only liked the second
finale. Even his friend Madame Devrient, though she loved and
admired him, said: “You are a man of genius but you write such
eccentric stuff, it is hardly possible to sing it.”
Never did Wagner feel that he was at fault, so great was his faith in
his ideas of doing away with arias, of not having stopping places in
an opera, just to begin some other song, and of making the words
equally important to the music.
The Nibelungen Ring
While working at Lohengrin he had started his studies of the

Icelandic and Germanic Saga, the Nibelungenlied. These tales
changed under his pen into the story of Siegfried, which he wove into
the trilogy known as The Nibelungen Ring or Trilogy with a
Prologue, as he called it, and as we call it now—The Tetralogy (in
four parts).
The four dramas of the Ring of the Nibelung are:
(1) The Rhine Gold (Das Rheingold)
(2) Valkyrie (Die Walküre)
(3) Siegfried
(4) The Twilight of the Gods (Die Götterdämmerung)
Many things happen in these tales but it takes the four to tell the
one big story:
Alberich the wicked Nibelung, a gnome, in his greed steals the gold
from the Rhine Maidens who were guarding it, hidden in the Rhine.
They tell him that the one who fashions a ring out of the gold will
rule the world, but must forego love. Alberich makes the ring but
Wotan the god of the gods wrests it from him. During the drama
various people secure the Ring but it had been cursed by Alberich
and brings disaster to all who get it. Finally the very gods themselves
are doomed to destruction, and Brünnhilde the oldest of the
Valkyries, the daughters of Wotan, returns the stolen treasure to the
waters of the Rhine.
The Wizard has painted in magnificent music the great Rhine
River, flowing across the stage; the fire surrounding Brünnhilde until
she is rescued by the valiant Siegfried, who knows no fear; Valhalla
the home of the gods; the hunt in which Siegfried drinks from the
magic horn of memory; and his funeral pyre into which Brünnhilde
casts herself and her horse carrying the ring which she has taken
from Siegfried’s finger back to the Rhine Maidens from whence it
came.
The scenes are gigantic and so is the music. Wagner, with his
ideals for freedom and the betterment of humanity, used these
legends as a cloak to cover his personal opinions which would have
been looked upon as anarchism if he had not used such clever and
artistic symbols. In Alberich’s greed for the gold, is hidden Wagner’s
ideas of the Government’s greed for power against which he had
fought so strenuously. Another lesson is that anyone possessing the
gold is denied love, showing that greed kills human feelings.
Because the Opera at Dresden did not use the things he liked, he
rebelled openly against the popular political and musical ideas; he
was banished and went to Zürich, Switzerland. Here he wrote more
fiery literature and made more enemies and a few friends, and the
enmity he stirred up against himself delayed his success. He hoped
for a better state of political life in order to write freer and more
beautiful music.
While he was in Zürich, Liszt, in Vienna, produced Lohengrin with
success. It was given to celebrate Goethe’s birthday (1850), before a
brilliant audience, and now Wagner’s fame seemed sure, though his
“pockets were empty.” Lohengrin’s success was slow in Germany, as
it took about nine years to reach Berlin and Dresden. It was thought
to be without melody! Can you hear Lohengrin’s song to the Swan,
the Wedding March or the Prelude? Listen to it in your mind’s ear or
auralize it! Wagner’s themes were so marvelously interwoven and he
did such amazing things with his orchestra, that it was difficult for
people to unravel the torrential new music. They were not prepared
for endless music flowing on like speech, suiting the music to the
word and not stopping the action to show off the singer’s skill. What
Gluck tried to do, Wagner did. His operas were music dramas
because the action or drama was his first thought.
For fifteen years in exile, he gave himself to literary work and
composition. He had ample time now to write of his musical theories
and his feelings about life.
Soon, London called him to lead the Philharmonic Society, which
he did during the time he was completing Valkyrie and sketching
Siegfried. He tried to interest the English in Beethoven and others
whom he loved, but of little avail. The people preferred the delightful
delicacy of Mendelssohn to the solidity of Beethoven. So here again
he made more enemies than friends, and his bitter pen did not help
to smooth things over. By the time he left London, he had finished
the Valkyrie.
In this great music drama, he tells the story of Siegmund and
Sieglinda, Brünnhilde and the Valkyries who carried the dead
warriors from the battle fields on their saddles to Valhalla. You hear
in the galloping music of the Ride of the Valkyries and the Fire
Music and Love Song of the first act, such music as never was written
by anyone but Wagner! Oh, it is a wonderful legend, explaining itself,
in Wagner’s own poems and with the short music name tags (leit-
motifs) which are enlarged and turned around and intermingled with
other name tags and which stand out beautifully when you know how
to listen.
Tristan and Isolde and Meistersinger
While in Zürich, Wagner met the merchant Otto Wesendonck,

whose beautiful and poetic wife Wagner loved dearly. She was a great
influence in his life and they were friends for many years. It was
during his friendship that he started the love drama of Tristan and
Isolde.
In 1859 he finished the love drama which tells of Tristan and the
lovely Queen of Ireland and how they drank the love potion and how
they loved and were separated. A noble story with some of the most
grippingly beautiful music ever written!
But with this masterpiece of masterpieces completed, he could get
nobody to produce it. Everyone said it was impossible to sing it, and
we know even today that it takes very special musical gifts and few
can do it well. For it is quite true that Wagner, with all his theories
about composition, thought little of the singer’s throat muscles and
more of what he wanted to say.
Poor Wagner was disconsolate! He could not get his works
performed and he was still prevented from returning to Germany,
the country he loved. So off he went to Paris and there Tannhäuser
failed utterly after three terrible, turbulent, horrible performances,
which almost ended in riots, no doubt planned ahead by his enemies.
But to offset this disaster, he was allowed to return home and
everyone rejoiced in his arrival. No doubt his treatment in Paris
softened the German heart.
Not long after this Wagner and his wife separated and some years
later in 1871, he married Cosima Liszt, who had been the wife of
Hans von Bülow.
After Wagner conducted opera on a tour through Russia, Hungary,
Bohemia (Czecho-Slovakia) and many German cities, Ludwig II,
King of Bavaria, sent for Wagner and offered him an income, and
from this time on Wagner composed without financial worries. He
was commissioned in 1865 to complete The Ring, and Tristan and
Isolde was performed by Hans von Bülow.
Again political intrigues and his enemies drove him to Switzerland,
and after Tristan and Isolde was given and while he was in
Switzerland, he completed The Ring and Die Meistersinger, the most
beautiful comic opera in the world, which was also produced by von
Bülow in Munich, June 21st, 1868. And now we fulfill our promise to
you, which we made in Chapter VIII about the Meistersinger:
Walther von Stolzing, a young knight, falls in love at first sight
with Eva the beautiful daughter of Pogner, the goldsmith of
Nüremberg, who has promised her to the winning singer in the
coming Festival of the Mastersingers. Beckmesser, the old town
clerk, counts on winning as he also loves Eva. As Walther does not
belong to the music guild, he has to pass the examination.
Beckmesser gives him so many bad marks for not keeping the
committee’s rules that he is not admitted.
But Hans Sachs, the greatest Meistersinger of all, the town
cobbler, thought Walther a beautiful singer even though he broke
musical laws and the very freedom and the new loveliness in his
music charmed him.
In the evening when Walther and Eva try to run away, Beckmesser
decides to serenade Eva. Hans Sachs, cobbling shoes in his doorway
interrupts Beckmesser’s ludicrous serenade with a jolly song, in
which he marks all Beckmesser’s mistakes with his hammer, just as
Beckmesser had marked Walther’s. The neighborhood is aroused,
confusion follows, Beckmesser gets a beating and Hans Sachs slips
Eva and Walther into his own house.
Next day Walther sings a song to Hans which he has dreamed and
Hans writes it down. Beckmesser comes in and finding the words
steals them, sure he could win if he sang a song of Hans Sachs.
Beckmesser fails miserably and Sachs calls on Walther to sing it.
Here he sings Walther’s Prize Song, which wins the approval of the
Meistersingers, and the prize—lovely Eva.
Here we get a splendid idea of what Wagner felt about new music,
for in the Meistersinger he tried to picture the jealousies of
composers, who condemned the beauty of his inspiration and new
ideas and methods.
Never was there an opera more delightful for young people, who
love the melodies and charming pictures of medieval Nüremberg.
Bayreuth
About this time the Valkyrie and Rhinegold had been given at the
Court Theatre in Munich (1869–1870). The King gave up his plan to
build a new theatre for these stupendous works, which needed
special machinery because of the elaborate stage effects. Wagner
insisted that scenery was as important as the words and music. So he
started to build, by general subscription over all Europe, a theatre at
Bayreuth. He succeeded so well that not only did Europe contribute
but America, too, and groups of people banded together to collect
money for it. Wagner was now the fashion and finally the new opera
house opened August 13th, 1876, with The Ring, for he had finished
Die Götterdämmerung the year before.
Artistically it was successful but not financially. If his pen had been
dipped in honey and not in bitters, he would have won his public
more easily, but he seemed unable to be diplomatic. So off he went to
London and other places to conduct concerts to make money to pay
the debts of his new theatre. Later he wrote the Festival March, for
the Philadelphia Centennial (1876), which helped financially.
The people were divided into two camps,—those for Wagner, and
those against him. So strong was the feeling, that during the 1880’s,
in Germany, signs in cafés read: “It is forbidden to discuss religion or
Wagner”! The proprietors wished to save their chairs and china
which the fists of their patrons would destroy.
Parsifal
During this time he was at work on Parsifal, a drama in music as

serious as oratorio yet with the most thrilling stage effects and
richness of music. Parsifal, Tristan and Isolde, The Ring and Die
Meistersinger are to every other opera what a plum pudding is,
compared to a graham cracker. In fact, all Wagner’s late music
dramas are like plum puddings, so rich and compact are they.
Parsifal was produced in 1882 in Bayreuth and was not given
again for six years. Later it was the occasion for yearly pilgrimages to
Bayreuth, as if to a shrine. It is so long that it takes the better part of
an afternoon and evening to perform it, yet you sit enraptured before
its gripping spell of beauty and holiness.
In 1903 the musical world was startled by the first performance in
America of Parsifal, as Wagner, in his will, had forbidden a stage
performance outside of Bayreuth. It was covered by copyright until
1913, which was supposed to have protected it from performance.
Heinrich Conried, director of the Metropolitan Opera Company in
New York City, in his eagerness for novelties, disregarded the
master’s wish, and mounted an elaborate production under the
direction of Alfred Hertz. This so offended the Wagner family that
they refused to allow anyone who had taken part in that performance
to appear in Bayreuth.
Bayreuth became a Mecca, to which pilgrims went every other
year, to attend the festivals. After the World War, Wagner’s family
turned to America for help to continue these festivals, interrupted by
the war, as the Wizard himself had done, when building his theatre.
In 1924 his son, Siegfried, visited America, conducted some
symphony concerts and secured funds to carry on the festivals.
Parsifal is a combination of three legends—of which one is the
Parsifal of our old friend the Minnesinger Wolfram von Eschenbach
(1204). (Chapter VIII.)
It is the story of the Redemption of Mankind, told in symbols with
great beauty of poetry, music and scenery. It is certain to fill you with
religious fervor, for it reaches the depths of your soul and raises you
above the things of the earth. Amfortas, the guardian of the Holy
Grail, whose wound represents the suffering of mankind, hears the
mystic voice of his father, Titurel, who tells him that not until a
sinless one comes with pity in his heart will the wound be healed.
Parsifal, “the guileless fool,” is his redeemer.
The year following the first production of Parsifal Wagner’s health
began to fail and he went to Venice where he died suddenly in 1883.
He was buried with fitting honors at Bayreuth which always honors
the memory of the Great Master of German Opera.
Here is a picture of Wagner in the words of his brother-in-law:
“the double aspect of this powerful personality was shown in his face;
the upper part beautiful with a vast ideality, and lighted with eyes
which were deep and severe, gentle or malicious, according to the
circumstances; the lower part wry and sarcastic. A mouth cold and
calculating and pursed up, was cut slantingly into a face beneath an
imperious nose, and above a chin which projected like the menace of
a conquering will.”
How the Wizard Changed Opera
When Wagner reached his full power, he composed drama rather

than opera in the old sense.
His music explained the words and action and expressed the state
of mind of the character.
The melodies are used very much like the theme in a sonata. These
leit-motifs (leading motives) are usually carried, as we told you, in
the weavings of his wonderful orchestral webs. This theme or leit-
motif or name tag, is tossed from instrument to instrument in
numberless entrancing ways. Sometimes he uses a flickering theme
for flames as in the fire music of The Valkyrie or glorious chimes or
trumpetings as in Parsifal to cast a holy spell; but, whatever he uses,
he charms and holds you spellbound.
He combines the counterpoint of the 16th century masters, with a
most modern feeling for harmony, inherited from the classic
Germans. He used harmony in a new way with a freedom it never
before had reached, and pointed the way for modern composers of
today.
As the Wizard, Wagner throws a glamor over the most mystic
happening, as when Siegmund, in Die Valkyrie, withdraws the
Sword from the tree; or in the most commonplace fact as when Eva
tells Hans Sachs that she has a nail in her shoe. In The
Meistersinger, you can always tell that he is making fun of
Beckmesser, because his name tag shows him to be petty and
ridiculous.
Although Wagner’s music is rich, very clear to us and beautiful, in
his day it seemed complicated and discordant, because of its great
volume and sonority, the result of the perfect part-writing.
For the first time, he makes the brasses of equal importance to the
string and wind instruments. It is thrilling to hear the trombones and
his beautiful use of trumpets. He used many of Berlioz’s ideas in
muffling horns and added new instruments, too, among them, the
bass clarinet and the English horn (cor anglais), which is a tenor
oboe and not a horn at all!
Wagner had a beautiful way of dividing up the parts for violins and
other instruments into smaller choirs which answered each other
and with which he could get special effects. For example, the Prelude
of Lohengrin is probably the nearest thing in shimmering music to
what the angels must play, so heavenly is it. Here he divides the
violins into many parts and it is far more beautiful than if they all
played the same thing. Thus, he gave more value to the instruments
and greatly improved the orchestra.
His preludes in which you hear the leading motives or name tags,
are a table of contents for what follows.
Wagner did not use tricks of decoration like Meyerbeer nor did he
give show-off pieces for his singers’ benefit. His idea was to use
sincere musical speech to tell the story and not one bit did he care
how hard the singer worked to carry out his idea.
Wagner, above all, was a dramatist, choosing lofty and noble
themes of heroic and ideal subjects in which his imagination could
play. He loved the sublime and the great spectacle.
The chief interest of Wagner’s opera is in the orchestra which
carries the theme webs. He used neither the folk song in its simple
beauty nor accepted classic arias which could be taken out and sung.
His song is often declaimed and appears not to sing with the
orchestra, for the voices are used as instruments and not to show off
vocal skill. Yet, Liszt was quick to take out from the operas and
transcribe for piano the Fire Music, the Ride of the Valkyrie and
many others which we now sing and whistle.
Finally, Wagner by his example has given courage to the man of
ideas, if he will believe in himself and work without ceasing.
CHAPTER XXVI
More Opera Makers—Verdi and Meyerbeer to Our Day
After reading about the feats of the Wizard it is not surprising that he
had many followers,—those who openly claimed to take him for an
example, and others who did not realize how much they received
from him and would not like to have been called his followers!
Verdi—The Grand Old Man of Italy
After following the Italian methods of writing opera and having

become a very famous composer, Verdi received inspiration from
Wagner in the last three or four years of his very long life. He was
much loved and it is difficult to tell whether it was his operas or his
beautiful character which prompted the affection. He was called “the
Grand Old Man of Italy.” A national hero was he, and the Italians’
idol. Praise and flattery did not make him proud but spurred him to
work through trouble and good fortune, and so he became one of the
greatest opera writers. He was born a few months after Wagner, in
the village of Roncole near Parma, and his life was interesting, for he
lived at the time when opera was popular and was going through the
Wagner upheaval which spread all over Europe.
He had a unique chance to make opera more important in Italy,
and succeeded in giving it a new impetus, even though in the
beginning his popular things followed popular patterns.
Verdi and the Organ grinder
Giuseppe Verdi (1813–1901) was the son of an innkeeper and, as a

little boy, showed marked musical talent. He was a good obedient
little fellow, but always rather melancholy in character and never
joined the village boys in their noisy amusements. “One thing only
could rouse him from his habitual indifference, and that was the
occasional passing through the village of an organ grinder. To the
child, who in after years was to afford an inexhaustible repertory to
those instruments for half a century all over the world, this was an
irresistible attraction. He could not be kept indoors, and would
follow the strolling player as far as his little legs could carry him.”
(Grove’s Dictionary.)
Who has not heard the Miserere from Il Trovatore played, all out
of tune, by an Italian organ grinder who sends a little monkey around
with a cup to gather in the pennies? We remember an organ grinder
in San Francisco who ground out the Miserere. Each year or two that
we returned there were more of the notes missing. Ten years later,
the performance was quite “toothless” and sounded very funny.
All his life, Verdi kept a little spinet that his father bought for him
in 1820. We see him then, at seven, deep in musical study and at ten
he was the organist of Roncole, going to school in Busseto, a nearby
town. One night when he was walking the three miles to go back to
Busseto after church, the poor little fellow was so weary that he
missed the road and fell into a canal, narrowly escaping death! Is it
not splendid that his village appreciated his talent and gave him a
scholarship which made it possible for him to go to Milan to continue
his musical studies!
His Operas
He did not compose an opera until 1839 when his Oberto in the
style of Bellini was produced in Milan with such success that he
received orders to write three more from which he gained much
good-will and fame.
It must have been a thrilling time for opera writers, because
Wagner was composing, too, and you know the great excitement he
caused. Amidst this interesting whirl of opinion, Verdi wrote one of
the operas ordered by the Milan director, and during this time he
was sorely stricken by the deaths of his wife and two lovely children.
Besides this, his opera failed and in his discouragement the poor
young man made up his mind to give up composition. However, a
rare good friend coaxed him back to his work after a little rest, and
he produced his successful Nebucco (Nebuchadnezzar) (1842), I
Lombardi the next year and his well known Ernani (1844). In this,
his first period, he used as models, Bellini and men of his type, not
writing anything startlingly new.
In his second period he wrote operas nearly as fast as we write
school compositions, and among the famous things are Rigoletto
(1851), Il Trovatore, La Traviata (story from Dumas’ Camille or
Dame aux Camelias), (1853), and The Masked Ball (1859). Ernani
and Rigoletto are founded on stories by Victor Hugo. The first
performance of La Traviata in Venice was a failure due more to the
performers, than to the opera itself which still crowds opera houses
of the world.
The greatest opera of his third period is Aida (1871), one of Verdi’s
masterpieces. An opera on an Egyptian subject was ordered by the
Khedive of Egypt for the opening of the Italian Opera House in Cairo,
for which Verdi received $20,000. Mariette Bey a famous
Egyptologist made the first sketch in order to give the right local
atmosphere to the libretto. Curiosity ran so high that every seat was
sold before the first night and it was a great success. Think how
electrified the audience must have been by the tenor solo, “Celeste
Aida,” one of Caruso’s greatest successes; by the realistic Nile scene;
the voice of the priestess in the mammoth Egyptian temple, and the
famous march with trumpets made specially for it!
Dear old lovable Verdi was a wise man as well as an accomplished
composer. He used more modern methods in Aida to hold audiences
who were hearing about Wagner and his startling innovations.
Other operas of this third period were La Forza del Destino and
one given at the Paris Grand Opera, Don Carlos, which was not up to
his standard. Until this time he showed great mechanical skill and a
sense of color and melody. The great singers have revelled in the
operas of his second period. In our day Marcella Sembrich, Nellie
Melba, Frieda Hempel, Luisa Tetrazzini, Amelita Galli-Curci,
Florence Macbeth and many others have sung the coloratura,—frilly,
soaring, gymnastic-singing, still very popular. However in Aida,
Verdi departed much from the usual, and people said that he was
copying Wagner, because they didn’t know the difference between
the influences which change a person’s ways, and imitation.
So he deserted the old models, Auber, Meyerbeer and Halévy for
something more substantial, his deeper and gigantically conceived
Aida. James Wolfe of the Metropolitan Opera said of the bigness of
this work as produced at the Metropolitan Opera House in New
York: “I have played before audiences of 30,000 in arenas in Mexico.
I am so at home in the opera that I do cross-word puzzles waiting for
my cue, and yet at the Metropolitan when I first played the King in
Aida with its flaming music, its hundreds of people and its scores of
horses, I was over-awed and frightened!”
After this, Verdi’s splendid mass, The Requiem, was written for the
death of the Italian hero Manzoni. In it he approaches the German
school in depth and seriousness, veering away from the emptiness of
Italian writing.
In his last efforts he seems definitely influenced by Wagner; for,
with his Otello and Falstaff we find a new Verdi, surpassing in form
and sincere melody anything that he had done. He was very
fortunate to have Arrigo Boito, his friend, to write librettos based on
Shakespeare’s Othello and Merry Wives of Windsor. When Falstaff
was given in New York (1925) a young American baritone, Lawrence
Tibbet, in the rôle of Ford, flashed into fame.

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Hubbard Test Bank

9.1 Aggregate Demand

7) Which of the following best describes the "wealth effect"?

11) The international trade effect states that

13) An increase in the price level will

14) Deflation will

17) Higher personal income taxes

24) How do lower taxes affect aggregate demand?

35) An increase in imports increases aggregate demand.

9.2 Aggregate Supply

1) The level of aggregate supply in the long-run is not affected by

2) Potential GDP refers to the level of

3) The long-run aggregate supply curve

5) What is potential GDP?

6) Full-employment GDP is also known as

8) On the long-run aggregate supply curve

9) Changes in the price level

12) Which aggregate supply curve has a positive slope?

15) An increase in the price level will

31) The long-run aggregate supply curve is vertical.

34) Explain why the long-run aggregate supply curve is vertical.

1) Long-run macroeconomic equilibrium occurs when

2) An increase in aggregate demand results in a(n) ________ in the ________.

6) A decline in the American economy means

22) A negative supply shock in the short run causes

23) Which of the following is considered a negative supply shock?

24) The long-run adjustment to a negative supply shock results in

25) In the long run

28) Stagflation occurs when

29) Stagflation usually results from

9.4 A Dynamic Aggregate Demand and Aggregate Supply Model

He began to study music with C. G. Müller, for Beethoven’s works

He had gone to Vienna with his symphony but showed it to no one;

While working at Lohengrin he had started his studies of the

While in Zürich, Wagner met the merchant Otto Wesendonck,

During this time he was at work on Parsifal, a drama in music as

When Wagner reached his full power, he composed drama rather

After following the Italian methods of writing opera and having

Giuseppe Verdi (1813–1901) was the son of an innkeeper and, as a

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2) An increase in aggregate demand results in a(n) in the .