Question 1

Part of the normal aftermath of a period of excessive aggregate demand is

Accepted Answer

A)  improvement in the quality of life. 
B)  reflation. 
C)  real GDP growth. 
D)  stagflation. 
E)  All of the above. 
A)  improvement in the quality of life. 
B)  reflation. 
C)  real GDP growth. 
D)  stagflation. 
E)  All of the above.

Question 2

The post-World War II record shows that recessionary gaps may be long-lasting because ____ tends not to occur.

Accepted Answer

A)  deflation 
B)  reflation 
C)  stagflation 
D)  disinflation 
A)  deflation 
B)  reflation 
C)  stagflation 
D)  disinflation

Question 3

The reason that stagflation tends to follow an inflationary gap is that

Accepted Answer

A)  output tends to fall even as prices continue to rise as part of the self-correcting mechanism. 
B)  government officials tend to overact in controlling inflation. 
C)  businesses try to increase profits by raising prices and increasing output. 
D)  workers accept pay cuts to maintain employment. 
A)  output tends to fall even as prices continue to rise as part of the self-correcting mechanism. 
B)  government officials tend to overact in controlling inflation. 
C)  businesses try to increase profits by raising prices and increasing output. 
D)  workers accept pay cuts to maintain employment.

Question 4

Which of the following is evidence of an inflationary gap?

Accepted Answer

A)  very long lines at employment agencies 
B)  very short waiting times for product delivery 
C)  very low sales figures 
D)  very long search times for people looking for jobs 
E)  very low unemployment rates 
A)  very long lines at employment agencies 
B)  very short waiting times for product delivery 
C)  very low sales figures 
D)  very long search times for people looking for jobs 
E)  very low unemployment rates

Question 5

The combination of high unemployment and high inflation is termed

Accepted Answer

A)  reflation. 
B)  stagflation. 
C)  depression. 
D)  unflation. 
A)  reflation. 
B)  stagflation. 
C)  depression. 
D)  unflation.

Question 6

If the selling price falls and input costs are fixed, profit margins will increase.

Accepted Answer

A) True 
 B)False

Question 7

Suppose we observe an economy experience an economic expansion and high inflation.This means the expansion is attributed to

Accepted Answer

A)  growth in aggregate demand. 
B)  growth in aggregate supply. 
C)  a reduction in aggregate demand. 
D)  a reduction in aggregate supply. 
A)  growth in aggregate demand. 
B)  growth in aggregate supply. 
C)  a reduction in aggregate demand. 
D)  a reduction in aggregate supply.

Question 8

The slope of the aggregate supply curve increases as output increases because

Accepted Answer

A)  the cost of resource-use increases as potential is reached. 
B)  consumers are willing to pay more as output expands. 
C)  firms substitute capital for labor as prices increase. 
D)  firms substitute capital for labor as capacity is reached. 
A)  the cost of resource-use increases as potential is reached. 
B)  consumers are willing to pay more as output expands. 
C)  firms substitute capital for labor as prices increase. 
D)  firms substitute capital for labor as capacity is reached.

Question 9

Increases in productivity are caused by

Accepted Answer

A)  better education and training of the labor force. 
B)  higher levels of literacy. 
C)  improvements in technology. 
D)  All of the above are correct. 
A)  better education and training of the labor force. 
B)  higher levels of literacy. 
C)  improvements in technology. 
D)  All of the above are correct.

Question 10

The aggregate supply curve slopes upward because firms

Accepted Answer

A)  seek to maximize profits and output. 
B)  normally can purchase inputs at fixed prices. 
C)  employ technology, which is always fixed. 
D)  purchase inputs whose prices rise as output rises. 
A)  seek to maximize profits and output. 
B)  normally can purchase inputs at fixed prices. 
C)  employ technology, which is always fixed. 
D)  purchase inputs whose prices rise as output rises.

Question 11

Using aggregate demand and aggregate supply analysis, explain why increases in oil did not lead to stagflation in 2006-2008 but did lead to stagflation in the 1970s and early 1980s.

Accepted Answer

In the 1970s the increases in oil prices

Question 12

During 2008-2010, the U.S.economy showed signs of a(n)

Accepted Answer

A)  mild recession. 
B)  recessionary gap. 
C)  inflationary gap. 
D)  deflationary gap. 
A)  mild recession. 
B)  recessionary gap. 
C)  inflationary gap. 
D)  deflationary gap.

Question 13

To calculate a firm's per unit of output profit, it is necessary to subtract

Accepted Answer

A)  price from cost per unit. 
B)  price from resource costs. 
C)  cost per unit from product price. 
D)  cost per unit from cost of resources. 
A)  price from cost per unit. 
B)  price from resource costs. 
C)  cost per unit from product price. 
D)  cost per unit from cost of resources.

Question 14

Many economists are in favor of increased immigration of adult foreigners who possess high levels of skills and education.Why?

Accepted Answer

A)  Economists are very caring individuals. 
B)  Economists believe this is a way to increase understanding among different ethnic groups. 
C)  Economists believe foreigners will work cheaper. 
D)  Economists believe this will increase aggregate supply. 
A)  Economists are very caring individuals. 
B)  Economists believe this is a way to increase understanding among different ethnic groups. 
C)  Economists believe foreigners will work cheaper. 
D)  Economists believe this will increase aggregate supply.

Question 15

The example of an inflationary gap in 2006-2007 suggested that the economy adjusts

Accepted Answer

A)  rapidly to inflationary gaps by lowering prices. 
B)  rapidly to inflationary gaps by raising prices. 
C)  slowly to inflationary gaps by lowering prices. 
D)  slowly to inflationary gaps by increasing inflation. 
A)  rapidly to inflationary gaps by lowering prices. 
B)  rapidly to inflationary gaps by raising prices. 
C)  slowly to inflationary gaps by lowering prices. 
D)  slowly to inflationary gaps by increasing inflation.

Question 16

Stabilization policy may be necessary to modify or counteract volatile changes in aggregate demand.

Accepted Answer

A) True 
 B)False

Question 17

An equilibrium point beyond a potential GDP is termed as

Accepted Answer

A)  deflationary gap. 
B)  recessionary gap. 
C)  inflationary gap. 
D)  acceleration gap 
A)  deflationary gap. 
B)  recessionary gap. 
C)  inflationary gap. 
D)  acceleration gap

Question 18

The 2006-2008 period can be accurately described as a time of stagflation.

Accepted Answer

A) True 
 B)False

Question 19

Economists generally assume that there is a short-run trade-off between

Accepted Answer

A)  output and employment. 
B)  inflation and employment. 
C)  deflation and unemployment. 
D)  inflation and unemployment. 
E)  output and growth. 
A)  output and employment. 
B)  inflation and employment. 
C)  deflation and unemployment. 
D)  inflation and unemployment. 
E)  output and growth.

Question 20

Figure 10-3
  
-When the economy represented in Figure 10-3 has completed the self-correcting adjustment process, the expenditure line in graph (a) will be

Accepted Answer

A)  flatter. 
B)  steeper. 
C)  higher. 
D)  lower. 
E)  unchanged. 
A)  flatter. 
B)  steeper. 
C)  higher. 
D)  lower. 
E)  unchanged.

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

Part of the normal aftermath of a period of excessive aggregate demand is

The post-World War II record shows that recessionary gaps may be long-lasting because ____ tends not to occur.

The reason that stagflation tends to follow an inflationary gap is that

Which of the following is evidence of an inflationary gap?

The combination of high unemployment and high inflation is termed

If the selling price falls and input costs are fixed, profit margins will increase.

Suppose we observe an economy experience an economic expansion and high inflation.This means the expansion is attributed to

The slope of the aggregate supply curve increases as output increases because

Increases in productivity are caused by

The aggregate supply curve slopes upward because firms

Using aggregate demand and aggregate supply analysis, explain why increases in oil did not lead to stagflation in 2006-2008 but did lead to stagflation in the 1970s and early 1980s.

During 2008-2010, the U.S.economy showed signs of a(n)

To calculate a firm's per unit of output profit, it is necessary to subtract

Many economists are in favor of increased immigration of adult foreigners who possess high levels of skills and education.Why?

The example of an inflationary gap in 2006-2007 suggested that the economy adjusts

Stabilization policy may be necessary to modify or counteract volatile changes in aggregate demand.

An equilibrium point beyond a potential GDP is termed as

The 2006-2008 period can be accurately described as a time of stagflation.

Economists generally assume that there is a short-run trade-off between

Figure 10-3 -When the economy represented in Figure 10-3 has completed the self-correcting adjustment process, the expenditure line in graph (a) will be

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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