Question 1

Figure 10-8
  
-Figure 10-8 illustrates a period of

Accepted Answer

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

Question 2

According to an old saying, when too much money is chasing too few goods, we have a(n)

Accepted Answer

A)  recessionary gap. 
B)  inflationary gap. 
C)  full employment. 
D)  paradox of thrift. 
A)  recessionary gap. 
B)  inflationary gap. 
C)  full employment. 
D)  paradox of thrift.

Question 3

Aggregate supply grows over time because of growing consumer and government spending.

Accepted Answer

A) True 
 B)False

Question 4

The major cost of production in the economy is

Accepted Answer

A)  interest expense. 
B)  capital costs. 
C)  rents. 
D)  profits. 
E)  wages. 
A)  interest expense. 
B)  capital costs. 
C)  rents. 
D)  profits. 
E)  wages.

Question 5

Why is a period of stagflation part of the normal aftermath of a period of excessive aggregate demand?

Accepted Answer

When aggregate demand is excessive, the

Question 6

The aggregate supply curve shows how much the nation's businesses are willing and able to produce at each price level.

Accepted Answer

A) True 
 B)False

Question 7

Figure 10-7
  
-Which of the panels in Figure 10-7 shows an economic recession caused by primarily by a change aggregate demand?

Accepted Answer

A)  Panel (
A)  
B)  Panel (
B)  
C)  Panel (
C)  
D)  Panel (
D)  
A)  Panel (
A)  
B)  Panel (
B)  
C)  Panel (
C)  
D)  Panel (
D)

Question 8

An increase in the price level causes the aggregate supply curve to shift to another supply schedule.

Accepted Answer

A) True 
 B)False

Question 9

Figure 10-2
  
-In Figure 10-2, which segment of the aggregate supply curve has the largest multiplier effect?

Accepted Answer

A)  AB 
B)  BC 
C)  CD 
D)  DG 
A)  AB 
B)  BC 
C)  CD 
D)  DG

Question 10

Figure 10-1
  
-In Figure 10-1, what is the equilibrium level of real GDP and equilibrium price?

Accepted Answer

A)  $6,000 billion real GDP and price level of 110 
B)  $5,000 billion real GDP and price level of 120 
C)  $5,000 billion real GDP and price level of 110 
D)  $7,500 billion real GDP and price level of 100 
A)  $6,000 billion real GDP and price level of 110 
B)  $5,000 billion real GDP and price level of 120 
C)  $5,000 billion real GDP and price level of 110 
D)  $7,500 billion real GDP and price level of 100

Question 11

Figure 10-5
  
-In Figure 10-5, which graph best illustrates the situation of an economy reacting to a recessionary gap by reducing resource cost levels?

Accepted Answer

A)  (1) 
B)  (2) 
C)  (3) 
D)  (4) 
A)  (1) 
B)  (2) 
C)  (3) 
D)  (4)

Question 12

Recessionary gap arises when

Accepted Answer

A)  inventory stock falls. 
B)  government spending increases. 
C)  when the general price level increases. 
D)  there is less spending than desired. 
A)  inventory stock falls. 
B)  government spending increases. 
C)  when the general price level increases. 
D)  there is less spending than desired.

Question 13

The reason why inflation reduces the value of the multiplier is that part of the change in demand is

Accepted Answer

A)  absorbed by price changes. 
B)  saved rather than spent. 
C)  matched by changes in supply. 
D)  matched by changes in income. 
A)  absorbed by price changes. 
B)  saved rather than spent. 
C)  matched by changes in supply. 
D)  matched by changes in income.

Question 14

Like the supply curve for individual goods and services, the aggregate supply curve slopes upward and to the right.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following events will lead to an inward shift of the aggregate supply curve?

Accepted Answer

A)  an increase in the price level 
B)  an increase in consumer spending 
C)  an increase in labor productivity 
D)  an increase in wage rates 
A)  an increase in the price level 
B)  an increase in consumer spending 
C)  an increase in labor productivity 
D)  an increase in wage rates

Question 16

When price level is considered, the value of the multiplier will be less than that suggested by the oversimplified version of multiplier.Why?

Accepted Answer

As long as the aggregate supply curve sl

Question 17

Figure 10-2
  
-In Figure 10-2, which segment of the aggregate supply curve has the smallest multiplier effect?

Accepted Answer

A)  AB 
B)  BC 
C)  CD 
D)  DG 
A)  AB 
B)  BC 
C)  CD 
D)  DG

Question 18

When the expenditure schedule is too low, 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 19

At levels of output close to full employment, the aggregate supply curve is probably

Accepted Answer

A)  very flat. 
B)  very steep. 
C)  sloped downward. 
D)  perfectly elastic. 
A)  very flat. 
B)  very steep. 
C)  sloped downward. 
D)  perfectly elastic.

Question 20

When equilibrium GDP is greater than potential GDP, jobs are plentiful and labor is in great demand.

Accepted Answer

A) True 
 B)False

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

Figure 10-8 -Figure 10-8 illustrates a period of

According to an old saying, when too much money is chasing too few goods, we have a(n)

Aggregate supply grows over time because of growing consumer and government spending.

The major cost of production in the economy is

Why is a period of stagflation part of the normal aftermath of a period of excessive aggregate demand?

The aggregate supply curve shows how much the nation's businesses are willing and able to produce at each price level.

Figure 10-7 -Which of the panels in Figure 10-7 shows an economic recession caused by primarily by a change aggregate demand?

An increase in the price level causes the aggregate supply curve to shift to another supply schedule.

Figure 10-2 -In Figure 10-2, which segment of the aggregate supply curve has the largest multiplier effect?

Figure 10-1 -In Figure 10-1, what is the equilibrium level of real GDP and equilibrium price?

Figure 10-5 -In Figure 10-5, which graph best illustrates the situation of an economy reacting to a recessionary gap by reducing resource cost levels?

Recessionary gap arises when

The reason why inflation reduces the value of the multiplier is that part of the change in demand is

Like the supply curve for individual goods and services, the aggregate supply curve slopes upward and to the right.

Which of the following events will lead to an inward shift of the aggregate supply curve?

When price level is considered, the value of the multiplier will be less than that suggested by the oversimplified version of multiplier.Why?

Figure 10-2 -In Figure 10-2, which segment of the aggregate supply curve has the smallest multiplier effect?

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

At levels of output close to full employment, the aggregate supply curve is probably

When equilibrium GDP is greater than potential GDP, jobs are plentiful and labor is in great demand.

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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