Question 1

An economic boom that creates an inflationary gap is usually followed later by

Accepted Answer

A)  falling prices. 
B)  a period of stagflation. 
C)  an increase of potential GDP. 
D)  an increase in aggregate supply. 
A)  falling prices. 
B)  a period of stagflation. 
C)  an increase of potential GDP. 
D)  an increase in aggregate supply.

Question 2

The recessionary gap of the 1990s in Japan led to decreases in the price level.

Accepted Answer

A) True 
 B)False

Question 3

Supply-side economics concerns itself with the interaction between demand and supply, the price level, and real GDP.

Accepted Answer

A) True 
 B)False

Question 4

When the expenditure schedule is too high, the result is a(n)

Accepted Answer

A)  unemployment surplus. 
B)  inflationary gap. 
C)  recessionary gap. 
D)  budgetary gap. 
A)  unemployment surplus. 
B)  inflationary gap. 
C)  recessionary gap. 
D)  budgetary gap.

Question 5

Economists do not agree on why wages are more rigid now than they were before World War II.

Accepted Answer

A) True 
 B)False

Question 6

The self-correcting mechanism would be expected to be very rapid in an economy with

Accepted Answer

A)  a large multiplier. 
B)  flexible prices. 
C)  rigid wages. 
D)  high labor productivity. 
A)  a large multiplier. 
B)  flexible prices. 
C)  rigid wages. 
D)  high labor productivity.

Question 7

A vertical aggregate supply curve increases the size of the multiplier effect.

Accepted Answer

A) True 
 B)False

Question 8

A period of stagflation can be considered as part of the normal aftermath of a

Accepted Answer

A)  decrease in aggregate demand. 
B)  period of high unemployment. 
C)  period of low unemployment. 
D)  period of inward shifting aggregate demand. 
A)  decrease in aggregate demand. 
B)  period of high unemployment. 
C)  period of low unemployment. 
D)  period of inward shifting aggregate demand.

Question 9

The only factor that can cause movement along the aggregate supply curve is the

Accepted Answer

A)  labor force. 
B)  capital stock. 
C)  availability of resources. 
D)  price level. 
E)  All of the above are correct. 
A)  labor force. 
B)  capital stock. 
C)  availability of resources. 
D)  price level. 
E)  All of the above are correct.

Question 10

The price of imported oil decreased in 2001.How did this affect the aggregate supply curve?

Accepted Answer

A)  It became steeper. 
B)  It became flatter. 
C)  It shifted inward. 
D)  It shifted outward. 
A)  It became steeper. 
B)  It became flatter. 
C)  It shifted inward. 
D)  It shifted outward.

Question 11

In the period from 1996-2000, the United States economy experienced the unusual combination of

Accepted Answer

A)  high unemployment and high inflation. 
B)  high unemployment and low inflation. 
C)  low unemployment and high inflation. 
D)  low unemployment and low inflation. 
A)  high unemployment and high inflation. 
B)  high unemployment and low inflation. 
C)  low unemployment and high inflation. 
D)  low unemployment and low inflation.

Question 12

Figure 10-1
  
-If the price level in Figure 10-1 were 110,

Accepted Answer

A)  inventories would be accumulating. 
B)  firms would have to lower their prices. 
C)  aggregate quantity demanded would equal aggregate quantity supplied. 
D)  shortages of goods would exist. 
A)  inventories would be accumulating. 
B)  firms would have to lower their prices. 
C)  aggregate quantity demanded would equal aggregate quantity supplied. 
D)  shortages of goods would exist.

Question 13

In 1973, the U.S.experienced a decline in output and high inflation.

Accepted Answer

A) True 
 B)False

Question 14

College graduates looking for jobs were less fortunate in 2007 than graduates in 2009.

Accepted Answer

A) True 
 B)False

Question 15

The aggregate supply curve is

Accepted Answer

A)  a schedule showing the relationship between the price level and the quantity of real GDP supplied. 
B)  usually upward sloping. 
C)  relatively flat at low levels of resource utilization. 
D)  All of the above are correct. 
A)  a schedule showing the relationship between the price level and the quantity of real GDP supplied. 
B)  usually upward sloping. 
C)  relatively flat at low levels of resource utilization. 
D)  All of the above are correct.

Question 16

The existence of an inflationary gap would tend to benefit most

Accepted Answer

A)  bankers. 
B)  retired persons. 
C)  unemployed workers. 
D)  stock owners. 
A)  bankers. 
B)  retired persons. 
C)  unemployed workers. 
D)  stock owners.

Question 17

How is it possible for the economy to have an inflationary gap?

Accepted Answer

A)  Equilibrium is at a GDP level below full employment. 
B)  Equilibrium is at a GDP level equal to full employment. 
C)  Equilibrium is at a GDP level above full employment. 
D)  GDP is rising at full employment. 
E)  GDP is falling at full employment. 
A)  Equilibrium is at a GDP level below full employment. 
B)  Equilibrium is at a GDP level equal to full employment. 
C)  Equilibrium is at a GDP level above full employment. 
D)  GDP is rising at full employment. 
E)  GDP is falling at full employment.

Question 18

One complication in the process of reducing inflation by creating recessions is that the price level

Accepted Answer

A)  adjusts more quickly to recessionary gaps than to inflationary gaps. 
B)  does not apply as it does in inflationary gaps. 
C)  always rises. 
D)  rarely falls. 
A)  adjusts more quickly to recessionary gaps than to inflationary gaps. 
B)  does not apply as it does in inflationary gaps. 
C)  always rises. 
D)  rarely falls.

Question 19

A company succumbs to a wage increase demand without any changes in the productivity of labor, price of the product, and the total output sold.Which of the following would happen?

Accepted Answer

A)  Total revenue of the company will fall. 
B)  Investment by the company will increase. 
C)  Profit per unit of the product will fall. 
D)  Average profit per unit will increase. 
A)  Total revenue of the company will fall. 
B)  Investment by the company will increase. 
C)  Profit per unit of the product will fall. 
D)  Average profit per unit will increase.

Question 20

The diminished employment prospects for the graduates of 2002 is most likely due to the existence of a(n)

Accepted Answer

A)  inflationary gap. 
B)  significant increase in real GDP. 
C)  shift of the aggregate demand curve outward. 
D)  recessionary gap. 
A)  inflationary gap. 
B)  significant increase in real GDP. 
C)  shift of the aggregate demand curve outward. 
D)  recessionary gap.

Exam 27: Bringing in the Supply Side: Unemployment and Inflation?

An economic boom that creates an inflationary gap is usually followed later by

The recessionary gap of the 1990s in Japan led to decreases in the price level.

Supply-side economics concerns itself with the interaction between demand and supply, the price level, and real GDP.

When the expenditure schedule is too high, the result is a(n)

Economists do not agree on why wages are more rigid now than they were before World War II.

The self-correcting mechanism would be expected to be very rapid in an economy with

A vertical aggregate supply curve increases the size of the multiplier effect.

A period of stagflation can be considered as part of the normal aftermath of a

The only factor that can cause movement along the aggregate supply curve is the

The price of imported oil decreased in 2001.How did this affect the aggregate supply curve?

In the period from 1996-2000, the United States economy experienced the unusual combination of

Figure 10-1 -If the price level in Figure 10-1 were 110,

In 1973, the U.S.experienced a decline in output and high inflation.

College graduates looking for jobs were less fortunate in 2007 than graduates in 2009.

The aggregate supply curve is

The existence of an inflationary gap would tend to benefit most

How is it possible for the economy to have an inflationary gap?

One complication in the process of reducing inflation by creating recessions is that the price level

A company succumbs to a wage increase demand without any changes in the productivity of labor, price of the product, and the total output sold.Which of the following would happen?

The diminished employment prospects for the graduates of 2002 is most likely due to the existence of a(n)

What Is Economics?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: The Importance of Marginal Analysis

Securities: Business Finance, and the Economy: The Tail that Wags the Dog?

The Firm and the Industry under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets I: The Price System

The Shortcomings of Free Markets

The Market's Prime Achievement: Innovation and Growth

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: The Human Inputs

Poverty, Inequality, and Discrimination

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation?

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder?

Exchange Rates and the Macroeconomy

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